Question

Cost of Goods Manufactured, using Variable Costing and Absorption Costing þn March 31, the end of the first year of operations, Barnard Inc., manufactured 4,100 units and sold 3,500 units. The following income statement was prepared, based on the variable costing concept: Barnard Inc. Variable Costing Income Statement For the Year Ended March 31, 2041 Sales $1,365,000 variable cost of goods sold: Variable cost of goods manufactured 5766,700 Inventory, March 31 (112,200) Total variable cost of goods sold (654,500) Manufacturing margin 5710,500 Total variable selling and administrative expenses (164,500) Contribution margin $546,000 Fixed costs: Fixed manufacturing costs $352,600 Fixed selling and administrative expenses 108,500 Total fixed costs (461,100) Operating income $84,900 Þetermine the unit cost of goods manufactured, based on (a) the variable costing concept and (b) the absorption costing concept. Variable costing Absorption costing

Answer 1

Units cost of goods manufactured based on :-

(a)Variable costing = $ 187

(b) Absorption Costing = $ 273

Explanation :-

Units manufactured = 4,100

(a) Variable costing (units cost ) = variable cost of goods manufactured / units manufactured

= 766,700/4,100

= $ 187 ( answer)

(b) Absorption Costing (units cost ) = (Variable cost of goods manufactured + Fixed Manufacturing costs )/ units manufactured

=( 766,700 + 352,600) / 4,100

= $ 273 ( answer)

Note :-

• Variable costing method includes only variable manufacturing costs .

• Absorption costing method includes all the costs associated with manufacturing a particular product.