Question

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

Selling price	$	113
Units in beginning inventory		860
Units produced		2,290
Units sold		2,770
Units in ending inventory		380
Variable costs per unit:
Direct materials	$	25
Direct labor	$	18
Variable manufacturing overhead	$	2
Variable selling and administrative	$	21
Fixed costs:
Fixed manufacturing overhead	$	66,410
Fixed selling and administrative	$	5,540

The company produces the same number of units every month, although the sales in units vary from month to month. The company's variable costs per unit and total fixed costs have been constant from month to month. (Hint: Use the reconciliation method.)

Required:

a.	What is the unit product cost for the month under variable costing? (Omit the "$" sign in your response.)

	Cost per unit
Variable costing	$

b.	Prepare a contribution format income statement for the month using variable costing. (Input all amounts as positive values except losses which should be indicated by a minus sign. Omit the "$" sign in your response.)

Variable Costing Income Statement
(Click to select)  Selling and administrative expenses  Variable cost of goods sold  Manufacturing overhead  Net operating income (loss)  Contribution margin  Sales  Variable selling and administrative expenses		$
Variable expenses:
(Click to select)  Contribution margin  Sales  Variable selling and administrative expenses  Variable cost of goods sold  Manufacturing overhead  Net operating income	$
(Click to select)  Sales  Contribution margin  Net operating income  Variable selling and administrative expenses  Manufacturing overhead  Variable cost of goods sold
(Click to select)  Contribution margin  Sales  Variable cost of goods sold  Variable selling and administrative expenses  Net operating income (loss)  Manufacturing overhead
Fixed expenses:
(Click to select)  Fixed selling and administrative expenses  Variable cost of goods sold  Sales  Contribution margin  Variable selling and administrative expenses  Fixed manufacturing overhead  Net operating income
(Click to select)  Sales  Fixed manufacturing overhead  Variable selling and administrative expenses  Fixed selling and administrative expenses  Contribution margin  Variable cost of goods sold  Net operating income
(Click to select)  Variable selling and administrative expenses  Manufacturing overhead  Contribution margin  Selling and administrative expenses  Variable cost of goods sold  Sales  Net operating income (loss)		$

c.	Without preparing an income statement, determine the absorption costing net operating income for the month. (Omit the "$" sign in your response.)

Reconciliation of Variable Costing and Absorption Costing Net Operating Incomes
Variable costing net operating income	$
(Click to select)  Deduct  Add  :  (Click to select)  Fixed manufacturing overhead costs deferred in inventory under absorption costing  Fixed manufacturing overhead costs released from inventory under absorption costing
Absorption costing net operating income	$

Answer 1

a.	What is the unit product cost for the month under variable costing? (Omit the "$" sign in your response.)

	Cost per unit
Variable costing	$ 45

b.	Prepare a contribution format income statement for the month using variable costing. (Input all amounts as positive values except losses which should be indicated by a minus sign. Omit the "$" sign in your response.)

Variable Costing Income Statement
Sales (2770*113)		$313010
Variable expenses:
Variable cost of goods sold (2770*45)	$ 124650
Variable selling and administrative expense (2770*21)	58170
Total Variable cost		182820
Contribution margin		130190
Fixed expenses:
Fixed manufacturing overhead	66410
Fixed selling and administrative expense	5540
Total fixed cost		71950
Net operating income		$ 58240

c.	Without preparing an income statement, determine the absorption costing net operating income for the month. (Omit the "$" sign in your response.)

Reconciliation of Variable Costing and Absorption Costing Net Operating Incomes
Variable costing net operating income	$ 58240
(Click to select)  Deduct  Add  :  (Click to select) Fixed manufacturing overhead costs released from inventory under absorption costing	-13920
Absorption costing net operating income	$ 44320