Question

Grondin Inc. has the following cost data for its past year of operations. Grondin Inc. produces tables and sells them for $150 each.

(You must show all your work in order to earn marks).

$$ Per unit

Variable Costs:

Direct Materials (DM) $25

Direct Labour (DL) $20

Variable Mf’g Overhead $ 5

Variable Selling & Admin $10

Total Variable costs $60

Fixed Costs:

Fixed Mf’g Overhead $360,000

Fixed Selling & Admin $200,000

Total Fixed Costs $560,000

Unit data:

Beginning Inventory 0

Units produced 12,000

Units sold 10,000

Required:

1) Calculate the Unit cost per table under Variable Costing

2) Calculate the Unit cost per table under Absorption Costing

3) Prepare a Contribution Margin format Income Statement using Variable Costing

4) Prepare a Traditional format income statement using Absorption Costing

5) Explain why the Operating Incomes were not the same under the different cost flow assumptions, in 2 sentences or less? Reconcile the difference in Operating Income.

Answer 1

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