Question

BIG Company began operations on January 1, 2017. The company sells a single product for $12 per unit. During 2017, 50,000 units were produced and 40.000 units were sold. During 2018, 50,000 units were produced and 52,000 units were sold. Costs for 2017 and 2018 were as follows: Direct materials $3.00 per unit Direct labor $2.00 per unit Variable manufacturing overhead $1.50 per unit Variable selling and admin expense $1.00 per unit Fixed manufacturing overhead per year $90,000 Fixed selling and admin expense per year $30,000

Answer 1

Answer:

23. a) $50,000

25. c) $116,000

Working Note:

	Big Company
	Income Statement (Variable Costing)
			2017		2018
	Sales	40,000.00	480,000.00	52,000.00	624,000.00
	Production cost:
	Direct material consumed	50,000.00	150,000.00	50,000.00	150,000.00
	Direct labor cost	50,000.00	100,000.00	50,000.00	100,000.00
	Variable manufacturing OH	50,000.00	75,000.00	50,000.00	75,000.00
	Cost of Production		325,000.00		325,000.00
Add:	Opening stock of FG			10,000.00	65,000.00
	(Value at cost of previous period's production)
	Current year cost per unit	50,000.00	6.50	50,000.00	6.50
Less:	Closing stock of FG	10,000.00	65,000.00	8,000.00	52,000.00
	(Value at current variable cost)
	Cost of good sold		260,000.00		338,000.00
Add:	variable administration,selling and dist.overhead	50,000.00	50,000.00	50,000.00	50,000.00
	Total variable cost		310,000.00		388,000.00
	Contribution (Sales - Total variable cost)		170,000.00		236,000.00
Less:	Fixed costs ( Pdn,adm,selling and dist)
	Fixed Manufacturing OH		90,000.00		90,000.00
	Fixed operating expenses		30,000.00		30,000.00
	Net Profit		50,000.00		116,000.00

24.b) $68,000

26. c) $112,400

Working Note:

	Big Company
	Income Statement (Absorption Costing)
			2,017		2,018
	Sales	40,000.00	480,000.00	52,000.00	624,000.00
	Production cost:
	Direct material consumed	50,000.00	150,000.00	50,000.00	150,000.00
	Direct labor cost	50,000.00	100,000.00	50,000.00	100,000.00
	Variable manufacturing OH	50,000.00	75,000.00	50,000.00	75,000.00
	Fixed manufacturing OH		90,000.00		90,000.00
	Cost of Production		415,000.00		415,000.00
Add:	Opening stock of FG		-	10,000.00	83,000.00
	(Value at cost of previous period's production)
	Current year cost per unit	50,000.00	8.30	50,000.00	8.30
Less:	Closing stock of FG	10,000.00	83,000.00	8,000.00	66,400.00
	(Value at production cost of current period)
	Cost of good sold		332,000.00		431,600.00
Add:	variable selling and admin expenses	50,000.00	50,000.00	50,000.00	50,000.00
	Fixed selling and admin expenses		30,000.00		30,000.00
	Total Cost		412,000.00		511,600.00
	Profit ( Sales - Total Cost )		68,000.00		112,400.00