Absorption and Variable Costing with Over- and Underapplied Overhead Flaherty, Inc., has just completed its first year of operations. The unit costs on a normal costing basis are as follows: Manu...
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Absorption and Variable Costing with Over- and Underapplied Overhead
Flaherty, Inc., has just completed its first year of operations. The unit costs on a normal costing basis are as follows:
Manufacturing costs (per unit): Direct materials (2 lbs. @ 1.30) $2.60 Direct labor (0.4 hr. @ 17.50) 7.00 Variable overhead (0.4 hr. @ 5.00) 2.00 Fixed overhead (0.4 hr. @ 8.00) 3.20 Total $14.80 Selling and administrative costs: Variable $1.80 per unit Fixed $220,500 During the year, the company had the following activity:
Units produced 26,000 Units sold 23,400 Unit selling price $38 Direct labor hours worked 10,400 Actual fixed overhead was $12,200 less than budgeted fixed overhead. Budgeted variable overhead was $4,000 less than the actual variable overhead. The company used an expected actual activity level of 10,400 direct labor hours to compute the predetermined overhead rates. Any overhead variances are closed to Cost of Goods Sold.
Required:
1. Compute the unit cost using (a) absorption costing and (b) variable costing.
Unit Cost Absorption costing $ Variable costing $ 2. Prepare an absorption-costing income statement. Round your answers to the nearest cent.
Flaherty, Inc. Absorption-Costing Income Statement For the First Year of Operations $ $ Less: Gross profit $ Operating income $ 3. Prepare a variable-costing income statement. Round your answers to the nearest cent.
Flaherty, Inc. Variable-Costing Income Statement For the First Year of Operations $ $ Add: Contribution margin $ Less: $ $ Operating income $ 4. Reconcile the difference between the two income statements.
The absorption costing generates an income $ than variable costing.
Homework Answers
Answer:
Requirement-1
| Description | Unit Cost |
| Absorption costing | 14.80 |
| Variable costing (2.60+7.00+2.00) | 11.60 |
Requirement-2
Absorption income statement:
| Description | Amont |
| Sales (23400*38) | 889200 |
| Less cost of good sold (23400*14.80) | (346320) |
| Less overhead applied | (4000) |
| gross profit | 538880 |
| Less selling and administrative expenses(220500+(23400*1.80))=220500+42120 | (262620) |
| Operating income | 276260 |
Requirement-3
Variable income statements
| Description | Amount |
| Sales(23400*38) | 889200 |
| Less variable COGS(23400*11.60) | (272440) |
| Less variable overhead | (4000) |
| Less variable selling exp(23400*1.80) | (42120) |
| Contribution margin | 570640 |
| Less fixed overhead(26000*3.20)-10400 | (72800) |
| Less selling expenses | (220500) |
| Operating income | 277340 |
Requirement-4
Difference between absorption costing and Variable costing is the variable costing is amount to be higher than the variable costing
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Absorption and Variable Costing with Over- and Underapplied Overhead Flaherty, Inc., has just completed its first year of operations. The unit costs on a normal costing basis are as follows: Manu...
Absorption and Variable Costing with Over- and Underapplied Overhead Flaherty, Inc., has just completed its first year of operations. The unit costs on a normal costing basis are as follows: Manufa...
Absorption and Variable Costing with Over- and Underapplied Overhead Flaherty, Inc., has just completed its first year of operations. The unit costs on a normal costing basis are as follows: Manufacturing costs (per unit): Direct materials (3 lbs. @ 1.30) $3.90 Direct labor (0.4 hr. @ 14.50) 5.80 Variable overhead (0.4 hr. @ 4.00) 1.60 Fixed overhead (0.4 hr. @ 8.00) 3.20 Total $14.50 Selling and administrative costs: Variable $1.70 per unit Fixed $221,000 During the year, the company had...
Absorption and Variable Costing with Over- and Underapplied Overhead Flaherty, Inc., has just completed its first year of operations. The unit costs on a normal costing basis are as follows: Manufactu...
Absorption and Variable Costing with Over- and Underapplied Overhead Flaherty, Inc., has just completed its first year of operations. The unit costs on a normal costing basis are as follows: Manufacturing costs (per unit): Direct materials (3 lbs. @ 1.30) $3.90 Direct labor (0.4 hr. @ 17.50) 7.00 Variable overhead (0.4 hr. @ 4.00) 1.60 Fixed overhead (0.4 hr. @ 6.00) 2.40 Total $14.90 Selling and administrative costs: Variable $1.60 per unit Fixed $217,500 During the year, the company had...
Absorption and Variable Costing with Over- and Underapplied Overhead Flaherty, Inc., has just completed its first year of operations. The unit costs on a normal costing basis are as follows: Manufa...
Absorption and Variable Costing with Over- and Underapplied Overhead Flaherty, Inc., has just completed its first year of operations. The unit costs on a normal costing basis are as follows: Manufacturing costs (per unit): Direct materials (2 lbs. @ 1.25) $2.50 Direct labor (0.4 hr. @ 15.00) 6.00 Variable overhead (0.4 hr. @ 5.00) 2.00 Fixed overhead (0.4 hr. @ 7.00) 2.80 Total $13.30 Selling and administrative costs: Variable $1.80 per unit Fixed $221,500 During the year, the company had...
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Whitman Company has just completed its first year of operations. The company's absorption costing income statement...
Whitman Company has just completed its first year of operations. The company's absorption costing income statement for the year appears below: Whitman Company Income Statement Sales (41,000 units * $41.10 per unit) Cost of goods sold (41,000 units * $24 per unit) $ 1,685,100 984,000 Gross margin Selling and administrative expenses 701,100 512,500 Net operating income $ 188,600 The company's selling and administrative expenses consist of $307,500 per year in fixed expenses and $5 per unit sold in variable expenses....
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1. Inventory Valuation under Absorption Costing and Variable Costing At the end of the first year of operations, 6,700 units remained in the finished goods inventory. The unit manufacturing costs during the year were as follows: Direct materials $38.30 Direct labor 13.80 Fixed factory overhead 5.30 Variable factory overhead 4.70 Determine the cost of the finished goods inventory reported on the balance sheet under (a) the absorption costing concept and (b) the variable costing concept. Absorption costing $ Variable costing...
Whitman Company has just completed its first year of operations. The company’s absorption costing income statement...
Whitman Company has just completed its first year of operations.
The company’s absorption costing income statement for the year
appears below:
Whitman Company
Income Statement
Sales (42,000 units
× $41.10 per unit)
$
1,726,200
Cost of goods sold
(42,000 units × $21 per unit)
882,000
Gross margin
844,200
Selling and
administrative expenses
525,000
Net operating
income
$
319,200
The company’s selling and administrative expenses consist of
$315,000 per year in fixed expenses and $5 per unit sold in...
Whitman Company has just completed its first year of operations. The company’s absorption costing income statement...
Whitman Company has just completed its first year of operations. The company’s absorption costing income statement for the year follows: Whitman Company Income Statement Sales (39,000 units × $45.10 per unit) $ 1,758,900 Cost of goods sold (39,000 units × $22 per unit) 858,000 Gross margin 900,900 Selling and administrative expenses 448,500 Net operating income $ 452,400 The company’s selling and administrative expenses consist of $292,500 per year in fixed expenses and $4 per unit sold in variable expenses. The...
Whitman Company has just completed its first year of operations. The company's absorption costing income statement...
Whitman Company has just completed its first year of operations. The company's absorption costing income statement for the year follows: Whitman Company Income Statement Sales (41,000 units x $45.10 per unit) Cost of goods sold (41,000 units x $21 per unit) Gross margin Selling and administrative expenses Net operating income $1,849,100 861,000 9BB, 100 471,500 $ 516,600 The company's selling and administrative expenses consist of $307,500 per year in fixed expenses and $4 per unit sold in variable expenses. The...
Whitman Company has just completed its first year of operations. The company’s absorption costing income statement...
Whitman Company has just completed its first year of operations. The company’s absorption costing income statement for the year follows: Whitman Company Income Statement Sales (39,000 units × $41.10 per unit) $ 1,602,900 Cost of goods sold (39,000 units × $24 per unit) 936,000 Gross margin 666,900 Selling and administrative expenses 487,500 Net operating income $ 179,400 The company’s selling and administrative expenses consist of $292,500 per year in fixed expenses and $5 per unit sold in variable expenses. The...
Whitman Company has just completed its first year of operations. The company's absorption costing income statement for the year appears below: Whitman Company Income Statement Sales (39,000 units * $42.10 per unit) Cost of goods sold (39,000 units * $22 per unit) $1,641,900 858,000 Gross margin Selling and administrative expenses 783,900 448,500 Net operating income $335,400 The company's selling and administrative expenses consist of $292,500 per year in fixed expenses and $4 per unit sold in variable expenses. The $22...
Whitman Company has just completed its first year of operations. The company's absorption costing income statement for the year appears below: Whitman Company Income Statement Sales (41,000 units * $41.10 per unit) Cost of goods sold (41,000 units * $24 per unit) $ 1,685,100 984,000 Gross margin Selling and administrative expenses 701,100 512,500 Net operating income $ 188,600 The company's selling and administrative expenses consist of $307,500 per year in fixed expenses and $5 per unit sold in variable expenses....
Whitman Company has just completed its first year of operations.
The company’s absorption costing income statement for the year
appears below:
Whitman Company
Income Statement
Sales (42,000 units
× $41.10 per unit)
$
1,726,200
Cost of goods sold
(42,000 units × $21 per unit)
882,000
Gross margin
844,200
Selling and
administrative expenses
525,000
Net operating
income
$
319,200
The company’s selling and administrative expenses consist of
$315,000 per year in fixed expenses and $5 per unit sold in...
Whitman Company has just completed its first year of operations. The company's absorption costing income statement for the year follows: Whitman Company Income Statement Sales (41,000 units x $45.10 per unit) Cost of goods sold (41,000 units x $21 per unit) Gross margin Selling and administrative expenses Net operating income $1,849,100 861,000 9BB, 100 471,500 $ 516,600 The company's selling and administrative expenses consist of $307,500 per year in fixed expenses and $4 per unit sold in variable expenses. The...
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