Question

managerial accounting

Breadfruit, Inc. began business last year making decorated platters. The unit costs on a normal costing basis are shown below. 3.00 18.00 Manufacturing Costs Per Unit: Direct materials (1.5 lbs. at $2 per lb.) Direct labor (2 hrs. at $9 per hr.) Variable manufacturing overhead (2 hrs. at $2.50 per hr.) Fixed manufacturing overhead (2 hrs. at $3.25 per hr.) Nonmanufacturing Costs: Variable (15% of sales) Fixed 5.00 6.50 230,000 During the year, the company had the following activity. Units produced Units sold Selling price per unit Direct labor hours worked 30,000 27,400 50 60,000 The actual fixed manufacturing overhead was $10,000 greater than the budgeted fixed manufacturing overhead. Any over- or underapplied manufacturing overhead is closed to cost of goods sold at the end of the year.

Answer 1

Unit Manufacturing Cost
Variable costing Method		Absorption Costing method
Manufacturing Cost		Manufacturing Cost
Direct Material	$       3.00	Direct Material	$       3.00
Direct Labor	$    18.00	Direct Labor	$    18.00
Variable Manufacturing Overhead	$       5.00	Variable Manufacturing Overhead	$       5.00
Total	$    26.00	Fixed Manufacturing Overhead	$       6.50
		Total	$    32.50

	Income statement using Absorption costing method
		Amount in $
	Sales(27400*50)	1,370,000
	Less: Cost Of Goods Sold	1,106,000
	Add: Closing Inventory(30000-26400)*32.50	117,000
	Contribution	381,000
	Less: Non Manufacturing cost
	Fixed	230,000
	Operating Income	151,000
W.N.1	Cost of goods sold
	Manufacturing Expense (32.50*27400)	890,500
	Variable(15% of sales)	205,500
	Add: Adjustment for Under applied fixed cost	10,000
		1,106,000

Income statement using Variable costing method
Sales	1,370,000
Less:Cost of goods sold(W.N. 2)	927,900
Add: Closing Inventory(30000-26400)*26	93,600
Contribution	535,700
Less: Manufacturing Fixed cost	195,000
Less: Non Manufacturing cost Fixed	230,000
Operating Income	110,700
Cost Of Goods Sold(W.N. 2)
Manufacturing Expenses(27400*26)	712,400
Variable(15% of sales)	205,500
Add: Adjustment for Under applied fixed cost	10,000
	927,900