Question
In: Accounting
MicroDecor produces stylish microwave ovens. Each unit sells for $620. During 20X7, the company produced 23,000...
MicroDecor produces stylish microwave ovens. Each unit sells for $620. During 20X7, the company produced 23,000 units, and sold 21,000 units. Beginning inventory contained a total of 3,200 units. Production and SG&A costs have been stable for many years. Assume the per unit costs in beginning and ending inventory are identical. Per unit cost information follows:
|
Direct materials cost |
$160 |
|
Direct labor cost |
110 |
|
Variable factory overhead |
85 |
|
Variable SG&A |
60 |
Annual fixed manufacturing overhead is $245,000. Annual fixed SG&A totals $1,500,000.
(a) Determine the number of units in ending inventory, and calculate the total carrying cost using
both variable and absorption costing.
(b) Calculate 20X7 net income using variable costing.
(c) Calculate 20X7 net income using absorption costing.
Solutions
Expert Solution
| WORKING NOTES : 1 | ||||||
| beginning Inventory | 3,200 | Units | ||||
| Unit Produced = | 23,000 | Units | ||||
| Unit Sold = | 21,000 | Units | ||||
| Closing Stock | 5,200 | Units | ||||
| Selling Price Per unit | $ 620.00 | Per Units | ||||
| Sales Value | $ 1,30,20,000 | |||||
| Fixed Overhead recovery Rate = | ||||||
| Fixed Manufacturing Overhead | $ 2,45,000 | |||||
| Divide by | "/" By | |||||
| Number of units Produced | $ 23,000 | |||||
| Fixed Overhead recovery Rate = | $ 10.65 | Per Units | ||||
| WORKING NOTES : 2 | ||||||
| CALCUALTION OF cost of production units by using absorption and variable Costing | ||||||
| Particulars | Absorption Costing Amount | Variable Costing Amount | ||||
| Direct Material Per unit | $ 160.00 | $ 160.00 | ||||
| Direct Labour Per Unit | $ 110.00 | $ 110.00 | ||||
| Vairable Manufacturing Overhead | $ 85.00 | $ 85.00 | ||||
| Fixed Manufacturing Overhead | $ 10.65 | $ - | ||||
| Cost of Production per unit | $ 365.65 | $ 355.00 | ||||
| SOLUTION = 1 | ||||||
| ABOSRPTION COSTING INCOME STATEMENTS | Absorption Costing | Calcultion | ||||
| Particulars | Amount | Unit | Rate | Amount | ||
| Sales | $ 1,30,20,000 | |||||
| Cost of Goods Sold | ||||||
| Beginning inventory | $ 11,70,087 | 3200 | $ 365.65 | $ 11,70,087 | ||
| Cost of Goods Manufactured | $ 84,10,000 | 23000 | $ 365.65 | $ 84,10,000 | ||
| Less: Ending Inventory | $ 19,01,391 | 5,200 | $ 365.65 | $ 19,01,391 | ||
| Cost of Goods Sold | $ 76,78,696 | |||||
| Gross Profit | $ 53,41,304 | |||||
| Less : Selling Expenses | ||||||
| Variable | $ 12,60,000 | 21,000 | $ 60.00 | $ 12,60,000 | ||
| Fixed | $ 15,00,000 | |||||
| Net Income | $ 25,81,304 | |||||
| SOLUTION = 2 | ||||||
| Calcultion | ||||||
| VARIABLE COSTING INCOME STATEMENTS | Variable Costing | Unit | Rate | Amount | ||
| Particulars | Amount | |||||
| Sales | $ 1,30,20,000 | |||||
| Cost of Goods Sold | ||||||
| Beginning inventory | $ 11,36,000 | 3200 | $ 355.00 | $ 11,36,000 | ||
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