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Problem 4 Cliffhangers Company had the following product information for March 2019: Selling Price Direct Materials...

Problem 4 Cliffhangers Company had the following product information for March 2019: Selling Price Direct Materials Direct Labor Variable Manufacturing Overhead Variable Selling Fixed Manufacturing Overhead Fixed Selling Production Sales (units) $149 per unit $35 per unit $29 per unit $13 per unit $6 per unit $129,000 $164,000 5,800 units 4,400 units REQUIRED: A. What is the product cost per unit under absorption costing? B. What is the product cost per unit under variable costing? C. Prepare an income statement using absorption costing. D. Prepare an income statement using variable costing.

Solutions

Expert Solution

Answer- a)-Unit product cost under Absorption costing:-Direct materials + Direct Labor+ Variable manufacturing overhead + fixed manufacturing overhead

=$35+$29+$13+$22 = $99 per unit

Explanation:- Unit fixed manufacturing overhead= fixed manufacturing overhead/No. of units produced

=$129000/5800 units =$22 per unit

b)-Unit product cost under Variable costing:-Direct materials + Direct Labor+ Variable manufacturing overhead

=$35+$29+$13 = $77 per unit

c)-

CLIFFHANGERS COMPANY
Income statement (Using absorption costing approach)
Particulars Amount
$
Sales (a) 4400 units*$149 per unit 655600
Less:- Variable cost of goods sold (b)
Opening inventory
Add:- Variable cost of goods manufactured 575600
Direct materials 5800 units*$35 per unit 203000
Direct labor 5800 units*$29 per unit 168200
Variable manufacturing overhead 5800 units*$13 per unit 75400
Fixed manufacturing overhead 129000
Variable cost of goods available for sale 575600
Less:- Closing inventory 1400 units*$99 per unit 138600 437000
Gross contribution margin C= a-b 218600
Less:-Variable selling & administrative exp. 4400 units*$6 per unit 26400
Contribution margin 192200
Less:- Fixed costs
Selling & administrative exp. 164000
Net Income 28200

d)-

CLIFFHANGERS COMPANY
Income statement (Using variable costing approach)
Particulars Amount
$
Sales (a) 4400 units*$149 per unit 655600
Less:- Variable cost of goods sold (b)
Opening inventory NIL
Add:- Variable cost of goods manufactured 446600
Direct materials 5800 units*$35 per unit 203000
Direct labor 5800 units*$29 per unit 168200
Variable manufacturing overhead 5800 units*$13 per unit 75400
Variable cost of goods available for sale 446600
Less:- Closing inventory 1400 units*$77 per unit 107800 338800
Gross contribution margin C= a-b 316800
Less:-Variable selling & administrative exp. 4400 units*$6 per unit 26400
Contribution margin 290400
Less:- Fixed costs
Manufacturing overhead 129000
Selling & administrative exp. 164000
Net Income -2600

ekkarill92 answered 5 months ago
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