Question

1 and 2 please

Quarryman Corporation Case Part I: Quarryman Corporation manufactures and sells 50-inch television sets and uses standard costing. Actual date relating to January, February, and March 2019 are as follows: January February March Unit data: Beginning Inventory 0 100 100 Production 1,500 1,425 1,425 1,560 Sales 1,550 1,400 Variable Costs: Manufacturing Cost per unit produced Marketing cost per unit sold $1,000 $1,000 $1,000 $700 $700 $700 Fixed Costs: Manufacturing Costs Marketing Costs $525,000 $525,000 $525,000 $140,000 $140,000 $140,000 The selling price per unit is $3,600. The budgeted level of production used to calculate the budgeted fixed manufacturing costs was 1,500 units in January, 1,425 units in February, and 1,560 units in March. There are no price, efficiency or spending variances to worry about Part II: The variable manufacturing costs per unit of Quarryman Corporation are as follows: January February $535 March Direct materials cost $535 $535 per unit Direct manufacturing labor cost per unit MOH cost per unit $190 $190 $190 $275 $275 $275 $1,000 $1,000 $1,000 1. Prepare income statement for Quarryman Corporation in January, February and March 2019 under throughput costing. 2. Contrast the results of throughput costing with those of variable costing. If you calculate different profit figures, reconcile the difference. In other words, tell me where the difference is, and quantify it.

Answer 1

1. In throughput costing, only direct material costs are considered as product cost. All other production costs and all marketing costs are period expenses. Therefore, product cost is $ 535 per unit.

Quarrryman Corporation
Throughput Costing Income Statement
	January	February	March
Sales	$ 5,040,000	$ 5,130,000	$ 5,580,000
Less: Throughput Cost of Goods Sold ( Unit Sales x $ 535 )	749,000	762,375	829,250
Throughput Contribution Margin	4,291,000	4,367,625	4,750,750
Period Expenses
Variable Production Conversion Costs	697,500	662,625	725,400
Fixed Production Conversion Costs	525,000	525,000	525,000
Variable Marketing Costs	980,000	997,500	1,085,000
Fixed Marketing Costs	140,000	140,000	140,000
Total Period Expenses	2,342,500	2,325,125	2,475,400
Operating Income	1,948,500	2,042,500	2,275,350

2. In variable costing, only variable manufacturing costs are product costs, while all other costs are period expenses. Therefore product cost is $ 1,000 per unit.

Quarryman Corporation Variable Costing Income Statement
	January	February	March
Sales	$ 5,040,000	$ 5,130,000	$ 5,580,000
Less: Variable Costs
Variable Cost of Goods Sold ( Unit Sales x $ 1,000)	1,400,000	1,425,000	1,550,000
Variable Marketing Costs	980,000	997,500	1,085,000
Total Variable Costs	2,380,000	2,422,500	2,635,000
Contribution Margin	2,660,000	2,707,500	2,945,000
Fixed Costs
Fixed Manufacturing Costs	525,000	525,000	525,000
Fixed Marketing Costs	140,000	140,000	140,000
Total Fixed Costs	665,000	665,000	665,000
Operating Income	1,995,000	2,042,500	2,280,000

Reconciliation between throughput costing and variable costing operating income:

Variable conversion cost per unit = $ 1,000 - $ 535 = $ 465

	January	February	March
Throughput Costing Operating Income	$ 1,948,500	$ 2,042,500	$ 2,275,350
Add: Conversion Costs in Ending Inventory	46,500	46,500	51,150
Less: Conversion Costs in Beginning Inventory	0	(46,500)	(46,500)
Variable Costing Operating Income	$ 1,995,000	$ 2,042,500	$ 2,280,000