Question

In: Accounting

Frances Manufacturing makes a product with total unit manufacturing costs of $64, of which $36 is...

Frances Manufacturing makes a product with total unit manufacturing costs of $64, of which $36 is variable. No units were on hand at the beginning of 2015. During 2015 and 2016, the only product manufactured was sold for $96 per unit, and the cost structure did not change. Frances uses the first-in, first-out inventory method and has the following production and sales for 2015 and 2016:

Units Manufactured

Units Sold

2015

100,000

70,000

2016

100,000

120,000
  1. Prepare gross profit computations for 2015 and 2016 using absorption costing.
  2. Prepare gross profit computations for 2015 and 2016 using variable costing.

Solutions

Expert Solution

a) Gross Profit using Absorption Costing:

Income statement (Absorption Costing) 2015 2016
Sales 6720000 11520000
Less: Cost of goods sold 4480000 7680000
          Opening 0 1920000
          Add: Units Manuf. 6400000 6400000
          Less: Closing Inventory 1920000 640000
Gross Margin 2240000 3840000

b) Gross Profit using Variable Costing:

Income statement (Variable Costing) 2015 2016
Sales 6720000 11520000
Less: Cost of goods sold 2520000 4320000
          Opening 0 1080000
          Add: Units Manuf. 3600000 3600000
          Less: Closing 1080000 360000
Contribution Margin 4200000 7200000

Working Notes:

2015 2016
Units Produced 100000 100000
Units Sold 70000 120000
Cost per Unit under Variable costing 36 36
Cost per Unit under Absorption costing 64 64
(Variable cost + Fixed prod cost/Units producted)
Ending Inventory using Variable costing 1080000 360000
(Closing Inventory*Cost per unit under variable costing)
Ending Inventory using Absorption costing 1920000 640000
(Closing Inventory*Cost per unit under variable costing)
Calculation of closing inventory:
Opening 0 30000
Add) Produced 100000 100000
Less) sold 70000 120000
Closing 30000 10000

ekkarill92 answered 3 years ago
Next > < Previous

Related Solutions

Baird Manufacturing Company makes a product that sells for $75 30 per unit Manufacturing costs for the product
  Problem 11-23A (Algo) Absorption versus variable costing LO 11-4 Baird Manufacturing Company makes a product that sells for $75 30 per unit Manufacturing costs for the product amount to $26.00 per unit variable, and $74,520 feed. During the current accounting period, Baird made 3.600 units of the product and sold 3.200 units Selling and administrative expenses were zero."   Required a. Prepare an absorption costing income statement. b. Prepare a variable costing income statement. Complete this question by entering...
If variable manufacturing costs are $8 per unit and total fixed manufacturing costs are $454,300, what...
If variable manufacturing costs are $8 per unit and total fixed manufacturing costs are $454,300, what is the manufacturing cost per unit if: a. 5,900 units are manufactured and the company uses the variable costing concept? $ b. 7,700 units are manufactured and the company uses the variable costing concept? $ c. 5,900 units are manufactured and the company uses the absorption costing concept? $ d. 7,700 units are manufactured and the company uses the absorption costing concept? $
If variable manufacturing costs are $8 per unit and total fixed manufacturing costs are $444,000, what...
If variable manufacturing costs are $8 per unit and total fixed manufacturing costs are $444,000, what is the manufacturing cost per unit if a. 6,000 units are manufactured and the company uses the variable costing concept? $ b. 7,400 units are manufactured and the company uses the variable costing concept? $ c. 6,000 units are manufactured and the company uses the absorption costing concept? $ d. 7,400 units are manufactured and the company used the absorption costing concept?
If variable manufacturing costs are $10 per unit and total fixed manufacturing costs are $325,000, what...
If variable manufacturing costs are $10 per unit and total fixed manufacturing costs are $325,000, what is the manufacturing cost per unit if a. 5,000 units are manufactured and the company uses the variable costing concept? $ b. 6,500 units are manufactured and the company uses the variable costing concept? $ c. 5,000 units are manufactured and the company uses the absorption costing concept? $ d. 6,500 units are manufactured and the company used the absorption costing concept? $
determine the total amount of manufacturing overhead,product costs & period costs
Caroline Company reports the following costs and expenses in May.Factory Utilities 11,500Depreciation on factory equipment 12,650Depreciation on delivery trucks 3,800Indirect factory labor 48,900indirect materials 80,800Direct materials used 137,600Factory manager's salary 8,000Direct labor 69,100Sales salaries 46,400Property taxes on factory building 2,500Repairs to office equipment 1,300factory repairs 2,000Advertising 18,000office supplies used 2,640 InstructionsFrom the information, determine the total amount of:(a) Manufacturing overhead.(b) Product costs.(c) Period costs.
Merline Manufacturing makes its product for $55 per unit and sells it for $141 per unit....
Merline Manufacturing makes its product for $55 per unit and sells it for $141 per unit. The sales staff receives a 10% commission on the sale of each unit. Its December income statement follows. MERLINE MANUFACTURING Income Statement For Month Ended December 31, 2017 Sales $ 1,410,000 Cost of goods sold 550,000 Gross profit 860,000 Operating expenses Sales commissions (10%) 141,000 Advertising 222,000 Store rent 25,100 Administrative salaries 45,500 Depreciation—Office equipment 55,500 Other expenses 13,100 Total expenses 502,200 Net income...
Merline Manufacturing makes its product for $70 per unit and sells it for $132 per unit....
Merline Manufacturing makes its product for $70 per unit and sells it for $132 per unit. The sales staff receives a 10% commission on the sale of each unit. Its December income statement follows. MERLINE MANUFACTURING Income Statement For Month Ended December 31, 2019 Sales $ 1,320,000 Cost of goods sold 700,000 Gross profit 620,000 Operating expenses Sales commissions (10%) 132,000 Advertising 204,000 Store rent 24,200 Administrative salaries 41,000 Depreciation—Office equipment 51,000 Other expenses 12,200 Total expenses 464,400 Net income...
Merline Manufacturing makes its product for $70 per unit and sells it for $138 per unit....
Merline Manufacturing makes its product for $70 per unit and sells it for $138 per unit. The sales staff receives a 10% commission on the sale of each unit. Its December income statement follows. MERLINE MANUFACTURING Income Statement For Month Ended December 31, 2017 Sales $ 1,380,000 Cost of goods sold 700,000 Gross profit 680,000 Operating expenses Sales commissions (10%) 138,000 Advertising 216,000 Store rent 24,800 Administrative salaries 44,000 Depreciation—Office equipment 54,000 Other expenses 12,800 Total expenses 489,600 Net income...
Merline Manufacturing makes its product for $70 per unit and sells it for $138 per unit....
Merline Manufacturing makes its product for $70 per unit and sells it for $138 per unit. The sales staff receives a 10% commission on the sale of each unit. Its December income statement follows. MERLINE MANUFACTURING Income Statement For Month Ended December 31, 2017 Sales $ 1,380,000 Cost of goods sold 700,000 Gross profit 680,000 Operating expenses Sales commissions (10%) 138,000 Advertising 216,000 Store rent 24,800 Administrative salaries 44,000 Depreciation—Office equipment 54,000 Other expenses 12,800 Total expenses 489,600 Net income...
Merline Manufacturing makes its product for $65 per unit and sells it for $131 per unit....
Merline Manufacturing makes its product for $65 per unit and sells it for $131 per unit. The sales staff receives a 10% commission on the sale of each unit. Its December income statement follows. MERLINE MANUFACTURING Income Statement For Month Ended December 31, 2017 Sales $ 1,310,000 Cost of goods sold 650,000 Gross profit 660,000 Operating expenses Sales commissions (10%) 131,000 Advertising 202,000 Store rent 24,100 Administrative salaries 40,500 Depreciation—Office equipment 50,500 Other expenses 12,100 Total expenses 460,200 Net income...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT