Question

4.Maher Corporation, which has only one product, has provided the following data concerning its most recent month of operations: Selling price $ 170 Units in beginning inventory Units produced Units sold Units in ending inventory 0 3,580 3,120 460 A A A Variable costs per unit: Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative expense $ Fixed costs: Fixed manufacturing overhead Fixed selling and administrative expense $ 12 $ 103,82 0 9,360 Required: (5points each) a. What is the unit product cost for the month under variable costing? b. What is the unit product cost for the month under absorption costing? c. Prepare a contribution format income statement for the month using variable costing. d. Prepare an income statement for the month using absorption costing. e. Reconcile the variable costing and absorption costing net operating incomes for the month.

Answer 1

1) Assuming the Firm Using the Variable Cositng Variable Costing Calculation of Unit cost Under Variable Costing Direct Material Direct Labour Variable Manufacturing Overhead Unit Product Cost Variable Costing Unit Product Cost 50 15 118 118 2) Assume Company Using Absorption Costing Calculation of Unit cost Under Absorption Costing 50 Direct Material Direct Labour Variable Manufacturing Overhead Fixed Manufacturing Over head (103820/3580) Unit Product Cost 15 29/ 147 Absorption Costing Unit Product Cost 147

530400 368160 37440 Variable Costing income Statement Sales (3120*170) LESS: Variable Expense Variable Cost of Goods Sold (or) Variable Product Cost ( 3120*118) Variable Selling and Administrative Expense(3120*12) Total Varible Expenses Total Contribution Margin Less:Fixed Expenses Fixed manufacturing Overheads Fixed Selling and Administrative Expenses Total fixed Expenses Net operating income (loss) 405600 124800 103820 9360 113180 11620

5304001 4586401 71760 Income Statement Under Absorption Costing Sales (3120*170) Cost of Goods Sold (3120*147) Gross Margin Selling and Administrative Expenses Variable Selling and Administrative Expense(3120*12) Fixed Selling and Administrative Expenses Net Operating Income 37440 9360 24960

Reconciliation of Varaible costing and Absorption costing net operating income 11620 13340 Variable Costing Net Operating Income ADD: fixed Manufacturing Overheads Deferred in inventory under Absorption Costing Absorption Costing Net Operating Income (loss) 24960 Calcualtion Units Produced Units Sold Difference in units =( Produces -Sold) Difference in manufacturing overheads = ( Difference in units * fixed manufacturing overheads per unit) = Fixed Manufacturing overheads per unit Fixed Manufacturing Overheads Deferred in inventory under Absorption Costing : 3580 3120 460 13,340 29 13,340