Question

Bracey Company manufactures and sells one product. The following information pertains to the company’s first year of operations:

Variable cost per unit:
Direct materials	$	21
Fixed costs per year:
Direct labor	$	241,500
Fixed manufacturing overhead	$	319,200
Fixed selling and administrative expenses	$	52,000

The company does not incur any variable manufacturing overhead costs or variable selling and administrative expenses. During its first year of operations, Bracey produced 21,000 units and sold 19,900 units. The selling price of the company’s product is $52 per unit.

Required:

1. Assume the company uses super-variable costing:

a. Compute the unit product cost for the year.

b. Prepare an income statement for the year.

2. Assume the company uses a variable costing system that assigns $11.50 of direct labor cost to each unit produced:

a. Compute the unit product cost for the year.

b. Prepare an income statement for the year.

3. Assume the company uses an absorption costing system that assigns $11.50 of direct labor cost and $15.20 of fixed manufacturing overhead cost to each unit produced:

a. Compute the unit product cost for the year.

b. Prepare an income statement for the year.

4a. Reconcile the difference between the super-variable costing and variable costing net operating incomes.

4b. Reconcile the difference between the super-variable costing and absorption costing net operating incomes.

Compute the unit product cost for the year. Assume the company uses super-variable costing.

	Unit product cost

Prepare an income statement for the year. Assume the company uses super-variable costing.

	Bracey Company Super-Variable Costing Income Statement       0 Fixed expenses:    0 $0

Compute the unit product cost for the year. Assume the company uses a variable costing system that assigns $11.50 of direct labor cost to each unit produced. (Round your answer to 2 decimal places.)

	Unit product cost

Prepare an income statement for the year. Assume the company uses a variable costing system that assigns $11.50 of direct labor cost to each unit produced. (Round your intermediate calculations to 2 decimal places.)

	Bracey Company Variable Costing Income Statement 0 Fixed expenses:    0 $0

Compute the unit product cost for the year. Assume the company uses an absorption costing system that assigns $11.50 of direct labor cost and $15.20 of fixed manufacturing overhead cost to each unit produced. (Round your answer to 2 decimal places.)

	Unit product cost

Prepare an income statement for the year. Assume the company uses an absorption costing system that assigns $11.50 of direct labor cost and $15.20 of fixed manufacturing overhead cost to each unit produced. (Round your intermediate calculations to 2 decimal places.)

	Bracey Company Absorption Costing Income Statement 0 $0

Reconcile the difference between the super-variable costing and variable costing net operating incomes.

	Super-variable costing net operating income (loss) Variable costing net operating income (loss) $0

Reconcile the difference between the super-variable costing and absorption costing net operating incomes.

	Super-variable costing net operating income (loss)    Absorption costing net operating income (loss) $0

Answer 1

Req.1
Unit Product Cost	$21
Income statement - super variable costing:
Units Produced		21000
Units sold		19900
	Per Unit	Amount $
Sales	52	1034800
Less: Variable costs:
Direct materials/Unit Cost	21	417900
Contribution	31	616900
Less:Fixed costs:
Direct labor		241500
Manufacturing Overhead		319200
Selling and Administration exp.		52000
Total fixed costs		612700
Net Operating Income		4200
Req.2
Unit Product Cost (21+11.5)	$32.5
Income statement - variable costing:
Units Produced		21000
Units sold		19900
	Per Unit	Amount $
Sales	52	1034800
Less: Variable costs:
Direct materials	21	417900
Direct labor	11.5	228850
Total variable costs/unit cost	32.5	646750
Contribution	19.5	388050
Less:Fixed costs:
Manufacturing Overhead		319200
Selling and Administration exp.		52000
Total fixed costs		371200
Net Operating Income		16850
Req.3:
Unit Product Cost (21+11.5+15.2)	$47.7
Income statement - absorption costing:
Units Produced		21000
Units sold		19900
	Per Unit	Amount $
Sales	52	1034800
Less: manufacturing costs:
Direct materials	21	417900
Direct labor	11.5	228850
Manufacturing Overhead (for 19900 units)	15.2	302480
Less:Manuf. Overhead for closing stock 1100 units		-16720
Total manufacturing costs/unit cost	47.7	949230
Gross Income	4.3	85570
Less:Admin & Selling costs:
Selling and Administration exp.		52000
Net Operating Income		33570
Req 4a)
	Amount $
Super variable costing net operating income (loss)	4200
Add: Direct labor deferred in inventory under Variable costing (1100*11.5)	12650
Variable costing net operating income (loss)	16850
Req 4b)
Super variable costing net operating income (loss)	4200
Add: Direct labor deferred in inventory under Variable costing (1100*11.5)	12650
Add: Fixed Overhead deferred in inventory under absorption costing (1100*15.2)	16720
Variable costing net operating income (loss)	33570

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