Question

3.        Variable and Absorption Costing

Follow the directions below and answer the following problem.

Maxwell Company manufactures and sells a single product. The following costs were incurred during 2014, the company’s first year of operations:

                    Variable Costs per Unit:

                              Production:

                                       Direct Materials                                            $16

                                       Direct Labor                                                     8

                                       Variable Manufacturing Overhead                  2

                              Selling and Administrative                                        4

                    Fixed Costs per Year:

                              Manufacturing Overhead                            $ 140,000

                              Selling and Administrative                             110,000

During 2014, the company produced 20,000 units and sold 18,000 units. The selling price of the company’s product is $50 per unit.

For Question A for both 1 & 2 answer below:

                                    Compute the Cost to Produce One Unit of Product

1.         Absorption Costing                                                     2.         Variable Costing

1B.       Income Statement – Absorption Costing

2B.       Income Statement – Variable Costing

I have the first 4 questions already answered I just need (Absorption Costing) (Variable Costing) (Income Statement – Absorption Costing) (2B Income Statement – Variable Costing)

Answer 1

Absorption costing income statement
Particulars	Amount	Amount
Sales		$        900,000
Cost of goods sold:
Direct materials	$        288,000
Direct labor	$        144,000
Variable Manf OH	$          36,000
Fixed Manf OH	$        126,000
Cost of goods sold	$        594,000	$      (594,000)
Gross profit		$        306,000
Other expenses:
Selling and administrative - Variable		$         (72,000)
Selling and administrative - Fixed		$      (110,000)
Net income		$        124,000

Variable costing income statement
Particulars	Amount	Amount
Sales		$        900,000
Variable expenses:
Direct materials	$        288,000
Direct labor	$        144,000
Variable Manf OH	$          36,000
Selling expenses	$          72,000
Total variable costs	$        540,000	$      (540,000)
Contribution margin		$        360,000
Fixed expenses:
Fixed Manf OH		$      (140,000)
Selling and administrative - Fixed		$      (110,000)
Net income		$        110,000