Question

1.

Grainger Company produces only one product and sells that product for $90 per unit. Cost information for the product is as follows:

Direct Material	$16	per Unit
Direct Labor	$25	per Unit
Variable Overhead	$5	per Unit
Fixed Overhead	$40,800

Selling expenses are $5 per unit and are all variable. Administrative expenses of $30,000 are all fixed. Grainger produced 6,000 units; sold 4,800; and had no beginning inventory.

A. Compute net income under

i. Absorption Costing $

ii. Variable Costing    $

B. Which costing method provide higher net income? By how much?

The absorption costing  method provided more net income by $

2.  

Box Springs, Inc., makes two sizes of box springs: twin and double. The direct material for the twin is $25 per unit and $45 is used in direct labor, while the direct material for the double is $45 per unit, and the labor cost is $50 per unit. Box Springs estimates it will make 5,000 twins and 10,000 doubles in the next year. It estimates the overhead for each cost pool and cost driver activities as follows:

Activity Cost Pools	Driver	Estimated Overhead	Use per Twin	Use per Double
Framing	Square Feet of Pine	$180,000	4,000	2,000
Padding	Square Feet of Quilting	210,000	110,000	100,000
Filling	Square Feet of Filling	340,000	550,000	300,000
Labeling	Number of Boxes	230,000	750,000	400,000
Inspection	Number of Inspections	187,000	11,000	6,000

How much does each unit cost to manufacture? Do not round intermediate computations but round final answers for the fields below to the nearest whole number.

Total Cost per Unit	Twin	Double
Direct Material	$25	$45
Direct Labor Cost	$45	$50
Overhead	$	$
Total per Unit	$	$

Answer 1