Question

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.

Answer 1

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