Question

Packer Company, which has only one product, has provided the following data concerning its most recent month of operations:

Selling price	$	95
Units in beginning inventory		350
Units produced		2,100
Units sold		1,720
Units in ending inventory		730
Variable cost per unit:
Direct materials	$	24
Direct labor	$	21
Variable manufacturing overhead	$	1
Variable selling and administrative	$	13
Fixed costs:
Fixed manufacturing overhead	$	52,500
Fixed selling and administrative	$	5,160

The company produces the same number of units every month, although the sales in units vary from month to month. The company's variable costs per unit and total fixed costs have been constant from month to month.

Required:

a.	What is the unit product cost for the month under variable costing? (Omit the "$" sign in your response.)

	Cost per unit
Variable costing	$

b.	Prepare a contribution format income statement for the month using variable costing. (Input all amounts as positive values except losses which should be indicated by a minus sign. Omit the "$" sign in your response.)

Variable Costing Income Statement
(Click to select)  Sales  Net operating income (loss)  Manufacturing overhead  Variable selling and administrative expenses  Contribution margin  Variable cost of goods sold  Selling and administrative expenses		$
Variable expenses:
(Click to select)  Selling and administrative expenses  Net operating income  Sales  Variable selling and administrative expenses  Variable cost of goods sold  Contribution margin  Manufacturing overhead	$
(Click to select)  Sales  Contribution margin  Variable selling and administrative expenses  Selling and administrative expenses  Variable cost of goods sold  Net operating income  Manufacturing overhead
(Click to select)  Variable cost of goods sold  Variable selling and administrative expenses  Manufacturing overhead  Sales  Selling and administrative expenses  Contribution margin  Net operating income (loss)
Fixed expenses:
(Click to select)  Fixed selling and administrative expenses  Net operating income  Contribution margin  Variable cost of goods sold  Fixed manufacturing overhead  Sales  Variable selling and administrative expenses
(Click to select)  Contribution margin  Fixed manufacturing overhead  Net operating income  Fixed selling and administrative expenses  Variable cost of goods sold  Variable selling and administrative expenses  Sales
(Click to select)  Selling and administrative expenses  Net operating income (loss)  Manufacturing overhead  Variable cost of goods sold  Sales  Variable selling and administrative expenses  Contribution margin		$

c.	Without preparing an income statement, determine the absorption costing net operating income for the month. (Omit the "$" sign in your response.)

Reconciliation of Variable Costing and Absorption Costing Net Operating Incomes
Variable costing net operating income	$
(Click to select)  Deduct  Add  :  (Click to select)  Fixed manufacturing overhead costs released from inventory under absorption costing  Fixed manufacturing overhead costs deferred in inventory under absorption costing
Absorption costing net operating income	$

Answer 1

a)
Particulars	Cost per Unit (in $ )
Direct materials	$ 24
Direct labor	$ 21
Variable manufacturing overhead	$ 1
Variable Costing Cost per unit	$ 46 per unit

b)
Variable costing Income Statement
Sales ( 1,720 Units x $ 95)		$ 163,400
Variable expenses:
- Variable cost of goods sold              ( 1,720 Units x $ 46)	$ 79,120
- Variable selling and administrative expenses                ( 1,720 Units x $ 13)	$ 22,360	($ 101,480)
Contribution margin		$ 61,920
Fixed expenses:
- Fixed manufacturing overhead	$ 52,500
- Fixed selling and administrative expenses	$ 5,160	($ 57,660)
Net operating income		$ 4,260

3)
Variable costing net operating income	$ 4,260
Add: Fixed manufacturing overhead deferred in inventory under absorption costing                ( 730 units (-) 350 Units ) x ($ 52,500 / 2,100)	$ 9,500
Absorption costing net operating income	$ 13,760