Question

Cost of Goods Manufactured, using Variable Costing and Absorption Costing

On December 31, the end of the first year of operations, Frankenreiter Inc., manufactured 4,000 units and sold 3,400 units. The following income statement was prepared, based on the variable costing concept:

Frankenreiter Inc. Variable Costing Income Statement For the Year Ended December 31, 20Y1
Sales			$986,000
Variable cost of goods sold:
Variable cost of goods manufactured	$556,000
Inventory, December 31	(83,400)
Total variable cost of goods sold			472,600
Manufacturing margin			$513,400
Total variable selling and administrative expenses			119,000
Contribution margin			$394,400
Fixed costs:
Fixed manufacturing costs	$256,000
Fixed selling and administrative expenses	78,200
Total fixed costs			334,200
Income from operations			$60,200

Determine 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

Answer-1- Unit product cost under Absorption costing= $203 per unit.

Explanation- Unit product cost under Absorption costing= (Variable cost of goods manufactured + Fixed manufacturing costs) /No. of units manufactured

= ($556000+$256000)/4000 units

= $812000/4000 units

= $203 per unit

2- Unit product cost under Variable costing= $139 per unit.

Explanation-Unit product cost under Variable costing= (Variable cost of goods manufactured/No. of units manufactured

= $556000/4000 units

= $139 per unit