Question

1. Duber Corporation, which has only one product, has provided the following data concerning its most recent month of operations:

Selling price                                                                        $ 120

Units in beginning inventory                                                    0

Units produced                                                                      8,900

Units sold                                                                               8,400

Units in ending inventory                                                         500

Variable costs per unit:                  

Direct materials                                                                         $ 38

Direct labor                                                                                $ 36

Variable manufacturing overhead                                               $ 6

Variable selling and administrative expense                               $ 9

Fixed costs:
Fixed manufacturing overhead                                                $ 151,300

Fixed selling and administrative expense                                 $ 109,200

1. Calculate the unit product cost under variable costing.
2. Prepare a contribution format income statement for the month using variable

costing.

3. Calculate the unit product cost under absorption costing.
4. Prepare an income statement for the month using absorption costing.

Answer 1

Solution:

Variable Costing - Calculate Unit Product Cost		Year 1
DM		38
DL		36
Variable MOH		6
Unit product Cost / Variable Manufacturing Cost		80
Fixed Manufacturing Cost		151300

Marginal Costing
	Units	Price per Unit	Amount	Amount
Sales Revenue	8400	120		1008000
Less: Marginal Cost of Sales
Opening Stock	0	0	0
Production Cost	8900	80	712000
Less: Closing Stock	500	80	40000
Marginal Cost of Sales				672000
Gross Margin				336000
Less: Variable Selling Expenses	8400	9		75600
Contribution Margin				260400
Less: Fixed Costs
Manufacturing Overhead	151300
Selling and Administrative	109200			260500
Marginal Costing Profit				-100

Absorption Costing - Calculate Unit Product Cost		Year 1
DM		38
DL		36
Variable MOH		6
Fixed MOH (151300/8900)		17
Total Unit Product Cost		97

Absorption Costing
	Units	Price per Unit	Amount	Amount
Sales Revenue	8400	120		1008000
Less:	.
Opening Stock	0	0	0
Production Cost
Variable Manufacturing Cost	8900	80	712000
Fixed Manufacturing Cost	8900	17.00	151300
Total Production Cost			863300
Less: Closing Stock	500	97.00	48500
Absorption Cost of Production			814800
Add:
Variable Selling Expenses	8400	9	75600
Fixed Selling & Administrative Expense			109200
Absorption Cost of Sales			999600	999600
Absorption Costing profit				8400