Question

Steven Corporation, which has only one product, has provided the following data concerning its most recent month of operations:

Selling price $ 122

Units in beginning inventory 0

Units produced 8,300

Units sold 8,200

Units in ending inventory 100

Variable costs per unit:

Direct materials $ 27

Direct labor $ 46

Variable manufacturing overhead $ 4

Variable selling and administrative expense $ 7

Fixed costs:

Fixed manufacturing overhead $ 199,200

Fixed selling and administrative $ 106,600

Questions:

a. What is the unit product cost for the month under variable costing?  

b. What is the unit product cost for the month under absorption costing?

c. Prepare a contribution format income statement for the month using variable costing.

d. Prepare an income statement for the month using absorption costing.

Thank you :)

Answer 1

	a. What is the unit product cost for the month under variable costing
	Variable Costs per unit
	Direct Materials	$27
	Direct Labor	$46
	Variable Manufacturing Overhead	$4
	Variable Selling and Admin Expense	$7
	Total Variable Cost per unit	$84
	Variable Manufacturing Cost per Unit	$77	(84-7)
	Quantity Sold	8,200
	Fixed Manufacturing Overhead	$199,200
	Fixed Manufacturing Overhead/Unit	$24.29	(199200/8200)
	UNIT PRODUCT COST=$77+$24.29=	$101.29
	b. What is the unit product cost for the month under absorption costing
	Variable Costs per unit
	Direct Materials	$27
	Direct Labor	$46
	Variable Manufacturing Overhead	$4			2378
	Variable Selling and Admin Expense	$7
	Total Variable Cost per unit	$84
	Variable Manufacturing Cost per Unit	$77	(84-7)
	Quantity Produced	8,300
	Fixed Manufacturing Overhead	$199,200
	Fixed Manufacturing Overhead/Unit	$24.00	(199200/8300)
	UNIT PRODUCT COST=$77+$24=	$101.00
	c. Prepare a contribution format income statement for the month using variable costing
	INCOME STATEMENT
a	Sales Revenue	$1,000,400	(8200*122)
b	Total Variable Cost	$688,800	(8200*84)
c=a-b	Contribution Margin	$311,600
	Fixed Costs:
d	Fixed Manufacturing Overhead	$199,200
e	Fixed Selling and Administrative	$106,600
f=c-d-e	Net Income	$5,800
	d. Prepare an income statement for the month using absorption costing
	INCOME STATEMENT
a	Sales Revenue	$1,000,400	(8200*122)
b	Cost of goods sold	$828,200	(8200*101
c=a-b	Gross Profit	$172,200
d	Variable Selling and Admin Expense	$57,400	(8200*7)
e	Fixed Selling and Administrative	$106,600
f=c-d-e	Net Income	$8,200