Question

For the coming year, Paulson Computers Inc. expects to produce 144,200 computers. Of these, 64,100 will be consumer (personal) computers and 80,100 will be small business computers. Common fixed overhead is $1,699,600. Additional information for the coming year is as follows: Consumer Small Business Computers Computers Price $ 643 $ 1,672 Unit direct materials 490 1,177 Unit direct labor 90 311 Unit variable overhead 22 49 Unit variable selling expense 35 64 Total direct fixed overhead 120,500 349,800 Fixed selling and administrative expense for Paulson Computers is $2,960,200 per year.

1(a) Calculate the unit variable cost under variable costing.

• Consumer computers:------------------- unit variable cost

• Small business computers: ------------------- unit variable cost.

1(b) Is this cost the same as unit variable product cost? Why or why not?

• .---------------the unit variable cost-------------------- equal the unit variable product cost.

The difference between the two costs is that------------------- also includes .--------------

2. Prepare a segmented variable-costing income statement for next year. The segments correspond to product lines: consumer computers and small business computers. Refer to the list of Labels and Amount Descriptions for the exact wording of text items within your income statement. If an amount is negative, first enter a minus sign (-).

Paulson Computers Inc.

Segmented Variable-Costing Income Statement

For the Coming Year

1		Consumer Computers	Small Business Computers	Total
2
3
4
5
6
7
8
9
10
11
12
13

Answer 1

1a.

Unit variable cost per unit:

	Consumer computer	Small business computer
Direct material per unit	$490	$1,177
Direct labor per unit	90	311
Variable overhead per unit	22	49
Variable selling expense	35	64
Variable cost per unit	$637	$1,601

Consumer computer $637 per unit variable cost

Small business computer $1,601 per variable cost

1b.

No the unit variable cost does not equal unit variable product cost.

The difference between the two costs is that unit variable cost also includes unit variable selling expense.

2.

Paulson Computers Inc. Segmented Variable Costing Income Statement For The Coming Year
	Consumer Computers	Small Business Computers	Total
Sales	$41,216,300 (64,100*$643)	$133,927,200 (80,100*$1,672)	$175,143,500
Variable cost:
Cost of goods sold	38,588,200 (64,100*$602)	123,113,700 (80,100*$1,537)	161,701,900
Selliing expense	2,243,500 (64,100*$35)	5,126,400 (80,100*$64)	7,369,900
Total variable costs	40,831,700	128,240,100	169,071,800
Contribution margin	384,600	5,687,100	6,071,700
Fixed costs;
Direct fixed overhead	120,500	349,800	470,300
Segment product margin	264,100	5,337,300	5,601,400
Common fixed costs:
Common fixed overhead			1,699,600
Fixed selling and administrative expense			2,960,200
Net operating income			$941,600