Question

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Required information B с A Chapter 6: Applying Excel 1 2 $ 309 $ 153 $ 55 3 Data 4 Selling price per unit 5 Manufacturing costs: 6 Variable per unit produced: 7 Direct materials 8 Direct labor 9 Variable manufacturing overhead 10 Fixed manufacturing overhead per year 11 Selling and administrative expenses: 12 Variable per unit sold 13 Fixed per year 14 $ 37 $ 110,000 $ 9 $ 47,000 15 Year 1 Year 2 16 Units in beginning inventory 17 Units produced during the year 18 Units sold during the year 0 2,500 2,300 2,200 2,300

Answer 1

Year 1 Points from the Given Information Particulars Beginning Inventory Add : Production Less : Sales Ending Inventory 2,500 2,300 200 Year 2 200 2,200 2,300 100 Other Details : Direct Materials Direct Labor Variable Manufacturing Overheads Variable Manufacturing Cost $ $ $ 153.00 $ 55.00 $ 37.00 $ 245.00 $ 153.00 55.00 37.00 245.00 Variable Selling and Admin. Expenses $ $ 9.00 $ 9.00 A Fixed Manufacturing Cost Fixed Selling and Admin. Expenses $ $ 110,000 $ 47,000 $ 110,000 47,000 Sale Price $ 309.00 $ 309.00

Requirement A and B | Income Statement under Absorption Costing Determination of Unit Production Cost : Particulars Year 1 Year 2 Budgeted Fixed Manufacturing Costs $ 110,000 $ 110,000 Budgeted Production 2,500 2,200 Budgeted Fixed Manufacturing Cost per Unit $ 44.00 $ 50.00 Budgeted Variable Manufacturing Cost per Unit $ 245.00 $ 245.00 Budgeted Total Manufacturing Cost per Unit $ 289.00 $ 295.00 Particulars $ Year 1 Amount ($) $ 710,700 $ Year 2 Amount ($) $ 710,700 Revenue Less : Cost of goods sold Beginning Inventory Add : Variable Manufacturing Costs Add : Fixed Manufacturing Costs Cost of goods available for Sale Less : Ending Inventory Cost of goods sold $ $ $ $ 612,500 110,000 722,500 57,800 $ $ $ $ $ 57,800 539,000 110,000 706,800 29,500 $ 664,700 $ 677,300 Gross Profit $ 46,000 $ 33,400 Selling and Administrative Costs : - Variable Selling and Administrative Exp. - Fixed Selling and Administrative Exp. Total Operating costs $ $ 20,700 47,000 $ $ 20,700 47,000 $ 67,700 $ 67,700 Operating Income $ (21,700) $ (34,300)

Requirement C and D | Income Statement under Variable Costing Year 1 Particulars $ Amount ($) Revenue $ 710,700 $ Year 2 Amount ($) $ 710,700 Less : Variable Costs - Variable Cost of goods sold Beginning Inventory Variable Manufacturing Costs Cost of goods available for sale Less : Ending Inventory Variable Cost of goods sold Manufacturing Margin Less : Variable Selling and Administrative Exp. Contribution Margin $ $ $ $ 612,500 612,500 49,000 $ $ $ A A A A 49,000 539,000 588,000 24,500 $ $ $ $ 563,500 147,200 20,700 126,500 $ $ $ $ 563,500 147,200 20,700 126,500 Fixed Costs : - Fixed Manufacturing Costs - Fixed Selling and Administrative Exp. Total Fixed Costs $ $ 110,000 47,000 $ $ 110,000 47,000 $ 157,000 $ 157,000 Operating Income $ (30,500) $ (30,500) Explanation : Variable Costing calculates the cost of goods sold considering only variable expenses and do not consider the Fixed Mfg. Costs are product costs. Fixed Mfg. Costs are treated as period costs and hence are absorbed fully in that period itself and do not carry forward through ending inventory.

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