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 |
0 |
|
Units produced |
3,580 |
|
Units sold |
3,120 |
|
Units in ending inventory |
460 |
|
Variable costs per unit: |
||
Direct materials |
$ |
53 |
Direct labor |
$ |
50 |
Variable manufacturing overhead |
$ |
15 |
Variable selling and administrative expense |
$ |
12 |
Fixed costs: |
||
Fixed manufacturing overhead |
$ |
103,820 |
Fixed selling and administrative expense |
$ |
9,360 |
Required:
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.
SOLUTION
a.
Direct materials | 53 |
Direct labor | 50 |
Variable Manufacturing Overhead | 15 |
Unit product cost | 118 |
b.
Direct materials | 53 |
Direct labor | 50 |
Variable Manufacturing Overhead | 15 |
Fixed Manufacturing overhead (103,820/3,580) | 29 |
Unit product cost | 147 |
c.
Sales (3,120*170) | 530,400 | |
Variable Costs: | ||
Variable manufacturing Costs (3,120*118) | 368,160 | |
Variable Selling and administrative expenses (3,120*12) | 37,440 | |
Total Variable Costs | 405,600 | |
Contribution Margin | 124,800 | |
Fixed Expenses: | ||
Fixed manufacturing overhead | 103,820 | |
Fixed Selling & Administrative Expenses | 9,360 | 113,180 |
Net Operating Income | 11,620 |
d.
Sales (3,120*170) | 530,400 |
Less: Cost of Goods Sold (3,120*147) | 458,640 |
Gross Profit | 71,760 |
Less: Selling and administrative expenses: | |
Variable Selling and administrative expense | 37,440 |
Fixed Selling and administrative expense | 9,360 |
Net Operating Income | 24,960 |
3.
Net Operating Income - Variable Costing | 11,620 |
Add : Fixed manufacturing overhead deferred in inventory ($29*450) | 13,340 |
Net Operating Income - Absorption Costing | 24,960 |
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