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Question 3 Beastboy Company, which has only one product, has provided the following data concerning its...

Question 3

Beastboy Company, which has only one product, has provided the following data concerning its most recent month of operations:

Selling price

RM120

Units in beginning inventory

500

Units produced

13,000

Units sold

12,800

Variable costs per unit:

Direct materials

RM35

Direct labor

RM15

Variable manufacturing overhead

RM12

Variable selling and administrative

RM6

Fixed costs:

Fixed manufacturing overhead

RM70,000

Fixed selling and administrative

RM140,000

The company produces the same number of units every month, although the sales in units vary from month to month. The company’s variable costs per unit and total fixed costs have been constant from month to month.

Required:

a) Calculate the cost of one unit of product under absorption costing.

b) Calculate the cost of one unit of product under variable costing.

c) Calculate Beastboy’s next year operating income under absorption costing.

d) Calculate Beastboy’s next year operating income under variable costing.

Solutions

Expert Solution

Answer to a:
Calculation of Cost of One Unit of Product Under Absorptin Costing
Particulars Amount in RM
Direct Material 35
Direct Labour 15
Variable Manufacturing OH 12
Fixed Manufacturing OH                    5.38
(70,000/13000)
Cost of Manufacturing One Unit                  67.38
Answer to b:
Calculation of Cost of One Unit of Product Under Variable Costing
Particulars Amount in RM
Direct Material 35
Direct Labour 15
Variable Manufacturing OH 12
Cost of Manufacturing One Unit                       62
Answer to c:
Operating Income Under Absorption Costing
Sales          15,36,000
(120RM * 12,800)
Less: Cost of Manufacturing            8,62,464
(67.38RM * 12,800)
Less: Variable Selling & Admin OH                76,800
(6RM * 12,800)
Less: Fixed Selling & Admin OH            1,40,000
Operating Income            4,56,736
Answer to d:
Operating Income Under Variable Costing
Sales          15,36,000
(120RM * 12,800)
Less: Cost of Manufacturing            7,93,600
(62RM * 12,800)
Less: Variable Selling & Admin OH                76,800
(6RM * 12,800)
Operating Income            6,65,600

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