Question

Sunrise Pools and Spas manufactures fibreglass forms for in-ground pools and swim spas for all-season use. Data regarding inventory, production and sales in units follows:

	December	January	February	March
Beginning inventory in units		1,000	2,500	7,700
Production in units	10,000	15,000	18,000	12,000
Sales in units		13,500	12,800	17,900
Ending inventory in units		2,500	7,700	1,800

Variable manufacturing costs per unit were $5.00, variable selling expenses per unit were $2.00, and fixed manufacturing overhead was $54,000 per month and has been for the past eight months.

Required:

1. Calculate the fixed overhead per unit for December, January, February and March. (1 mark) Use two decimals when recording amounts per unit, i.e. 1.75.

	December	January	February	March
	$	$	$	$
Fixed overhead per unit	$	$	$	$

2. Calculate the amount of fixed overhead contained in beginning inventory for January, February and March. Use two decimals when recording amounts per unit, i.e 1.75.

	January	February	March
	$	$	$
Fixed overhead in beginning inventory	$	$	$

3. Calculate the amount of fixed overhead contained in ending inventory for January, February and March. Use two decimals when recording amounts per unit, i.e. 1.75.

	January	February	March
	$	$	$
Fixed overhead in ending inventory	$	$	$

4. Calculate the absorption costing operating income or loss for January, February and March. Enter negative numbers with a minus sign in front of them, i.e. -10000.

4	January	February	March
_Variable costing operating income (loss)	-$11,000	-$6,000	$14,000
Add:
Deduct:
Absorption costing operating income (loss)	$	$	$

Answer 1

1		January	February	March
	Fixed Overhead	$                54,000	$           54,000	$               54,000
	Production	15000	18000	12000
	Fixed Overhead per unit	$                    3.60	$               3.00	$                   4.50
2		January	February	March
	Beginning Inventory	1000	2500	7700
	Fixed Overhead per unit	$                    5.40	$               3.60	$                   3.00
	Beginning Inventory	$                  5,400	$             9,000	$               23,100
3		January	February	March
	Ending Inventory	2500	7700	1800
	Fixed Overhead per unit	$                    3.60	$               3.00	$                   4.50
	Ending Inventory	$                  9,000	$           23,100	$                 8,100
4		January	February	March
	Variable costing operting Income / (Loss)	$               -11,000	$           -6,000	$              -14,000
	Add:Fixed Overhead Beginning Inventory	$                  5,400	$             9,000	$               23,100
	Less:Fixed Overhead Ending Inventory	$                 -9,000	$         -23,100	$                -8,100
	Absorption Costing operating Income/(loss)	$               -14,600	$         -20,100	$                 1,000