Question

White Water Rafting Company manufactures kayaks, which sell for $565 each. The variable costs of production (per unit) are as follows: Direct Material $ 200 Direct labor 110 Variable manufacturing overhead 80 Budgeted fixed overhead in 20x1 was $400,000 and budgeted production was 50,000 kayaks. The year's actual production was 50,000 units, of which 47,000 were sold. Variable selling and administrative costs were $5 per unit sold; fixed selling and administrative costs were $75,000. Required: 1. Calculate the product cost per kayak under (a) absorption costing and (b) variable costing. 2. Prepare operating income statements for the year using (a) absorption costing and (b) variable costing. 3. Reconcile reported operating income under the two methods using the shortcut method.

Please show all calculations.

Answer 1

Answer Page No 0 0 unit product cool @Absorption conting direct materials coof - $200 direct labor cost $110 Variable manubacliring overhead = 480 Fired manubachoring overhead = $400,000 - 48 unit product cost $200 + $110 +680 + $8 50,000 $398 :. unit product cost under absophion casting - 4 398 per unit variable conting direct material cosf = $200 direct labor cost $110 variable marubachoning overhead = 480 unit product cost $200 + $110+680 = $390 :. unit product coof under variable conting = $390 per unit @ @ absorption casting income statement cost of goods produced - 50,000 x 398 $ 19,900,000 Ending Powentory = (50,000 –44000) x $398 = $1,194,000

Page No ③ Particular Amount Amount Sales (44000 x $565) $26,555,000 cost of goods sold Coist of goods produced $19,900,000 opening inventory $0 Ending inventory ($1,194,000($18,406,000 Grom profit $7,849,000 Variable sellinge administrative $470062 Fixed selling adminisbative expenses & 75,000 Het operating income $ 7,539,000 © variable corfing income statement Particular Amount Sales (49000 XS65) $26,555,000 $ 235,000 Variable costs voniable manufacturing cost ( 4 390 X 47000X$18,330,000) variable Selling & administrative expense (#235,000) ( $5 X47000) 7,990,000 $400,000 $ 75000 Contribution fixed manufacturing overhead fixed selling and adminisläalive expense Net income $ 7,515,000

Page No 3 Nd gameling income under almapliga cashing and variable conting : Net Particular Amount operating income - Variable costing $7,515,000 Fixed manubachūring overhead deferred $ 24,000 inventory [c 47000) * $8] Fixed marubacturing overhead xeleased in inven Net operating income - absoption costing $7,539,000 50,000 $0 - tory