Question

Bracey Company manufactures and sells one product. The following information pertains to the company’s first year of operations:

Variable cost per unit:
Direct materials	$	28
Fixed costs per year:
Direct labor	$	367,500
Fixed manufacturing overhead	$	389,550
Fixed selling and administrative expenses	$	66,000

The company does not incur any variable manufacturing overhead costs or variable selling and administrative expenses. During its first year of operations, Bracey produced 24,500 units and sold 22,700 units. The selling price of the company’s product is $65 per unit.

Required:

1. Assume the company uses super-variable costing:

a. Compute the unit product cost for the year.

b. Prepare an income statement for the year.

2. Assume the company uses a variable costing system that assigns $15.00 of direct labor cost to each unit produced:

a. Compute the unit product cost for the year.

b. Prepare an income statement for the year.

3. Assume the company uses an absorption costing system that assigns $15.00 of direct labor cost and $15.90 of fixed manufacturing overhead cost to each unit produced:

a. Compute the unit product cost for the year.

b. Prepare an income statement for the year.

4a. Reconcile the difference between the super-variable costing and variable costing net operating incomes.

4b. Reconcile the difference between the super-variable costing and absorption costing net operating incomes.

Answer 1

a) unit product cost = cost of direct material = $28

b)

Income statement

Sales revenue		$1475500
Variable cost of goods sold(22700×$28)		($635600)
contribution margin		$839900
Fixed expenses:
Direct labour	$367500
Fixed manufacturing overhead	$389550
Fixed selling and administrative expenses	$66000
Total fixed expenses		($823050)
Net operating income		$16850

2)

a) unit product cost = $43

Unit product cost = direct material + direct labour

= $28 + $15 = $43

b)

Income statement

Sales revenue		$1475500
Less: variable cost (22700×$43)		($976100)
Contribution margin		$499400
Fixed expenses:
Fixed manufacturing overhead	$389550
Fixed selling and administrative overhead	$66000
Total fixed expenses		$455550
Net income		$43850

NOTE: AS PER HOMEWORKLIB RULES ANSWER TO ONLY FIRST FOUR PARTS WILL BE PROVIDED. TO KNOW FURTHER PLEASE POST A SEPARATE QUESTION