Question

In the year, TGIT Inc. incurred the following costs:

Direct materials	$ 4.00 per unit
Direct labour	$ 5.00 per unit
Variable manufacturing overhead	$ 3.00 per unit
Fixed manufacturing overhead	$ 100,000
Variable selling expenses	$ 1.00 per unit
Fixed selling expenses	$ 40,000

In the year, TGIT produced 40,000 units and sold 42,000 units. The company had no beginning or ending work-in-process inventory. However, there are 5,000 units in beginning finished goods inventory. The 5,000 units produced in the previous year have the same costs per unit as the units produced in the year.

Hint - be clear about the difference between absorption and variable costing models

Using the information provided, answer the following questions:

a) Without making any calculations, which costing method will produce a higher net income for TGIT?

AnswerVariable CostAbsorption CostNeither

b) How many units are in finished goods inventory on December 31?

Answer units

c) Under variable costing, what is the product cost per unit?

$ Answer per unit

d) Under variable costing, what is the total value of TGIT's finished goods inventory on December 31?

$ Answer

e) Under variable costing,what is the total selling and administrative expense for the year?

$ Answer

f) Under absorption costing, what is the product cost per unit?

$ Answer per unit

g) Under absorption costing, what is the total value of TGIT's finished goods inventory on December 31?

$ Answer

h) Under absorption costing,what is the total selling and administrative expense for the year?

$ Answer

Answer 1