Question

TB Problem Qu. 6-273 Maher Corporation, which has only one product ...

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

Selling price	$	197
Units in beginning inventory		0
Units produced		3,200
Units sold		2,800
Units in ending inventory		400
Variable costs per unit:
Direct materials	$	53
Direct labor	$	58
Variable manufacturing overhead	$	13
Variable selling and administrative expense	$	12
Fixed costs:
Fixed manufacturing overhead	$	112,000
Fixed selling and administrative	$	8,400

Required:

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.

e. Reconcile the variable costing and absorption costing net operating incomes for the month.

Answer 1

		unit product cost
				Absorption	Variable
	Direct materials			53	53
	direct labor			58	58
	VOH			13	13
	FOH	(112000/3,200)		35
	unit product cost			159	124
			cost per unit
	Variable costing		124
			cost per unit
	Absorption costing		159
	Variable costing income statement
	Sales					551600
	Variable expenses
	cost of goods sold				347200
	Selling and administrative expense				33600
						380800
	Contribuiton margin					170800
	fixed expense
	Fixed manufacturing overhead				112,000
	Fixed selling and administrative				8,400
						120,400
	Net operating income					50,400
	Absorption Costing Income Statement
	sales					551600
	Cost of goods sold					445200
	Gross Margin					106400
	Selling and administrative expense
	Variable selling & adm expense				33600
	Fixed selling & adm expense				8,400	42,000
	Net operating income					64,400
	Reconciliation of Variable Costing and Absorption Costing Net Operating Income
	Variable costing net operating income(loss)						50,400
	Fixed overhead deferred in ending inventory						14000
	Absorption costing net operating income(loss)						64,400