Question

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

Selling price	$	193
Units in beginning inventory		0
Units produced		3,090
Units sold		2,910
Units in ending inventory		180
Variable cost per unit:
Direct materials	$	53
Direct labor	$	59
Variable manufacturing overhead	$	15
Variable selling and administrative	$	13
Fixed costs:
Fixed manufacturing overhead	$	89,610
Fixed selling and administrative	$	8,730

Required:

a.	What is the unit product cost for the month under variable costing? (Do not round intermediate calculations. Omit the "$" sign in your response.)

	Cost per unit
Variable costing	$

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

	Cost per unit
Absorption costing	$

c.	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)  Variable selling and administrative expenses  Selling and administrative expenses  Manufacturing overhead  Variable cost of goods sold  Contribution margin  Net operating income (loss)  Sales		$
Variable expenses:
(Click to select)  Variable selling and administrative expenses  Net operating income  Variable cost of goods sold  Contribution margin  Direct labor  Sales  Direct materials	$
(Click to select)  Direct materials  Contribution margin  Variable cost of goods sold  Sales  Direct labor  Net operating income  Variable selling and administrative expenses
(Click to select)  Selling and administrative expenses  Net operating income (loss)  Variable selling and administrative expenses  Variable cost of goods sold  Sales  Manufacturing overhead  Contribution margin
Fixed expenses:
(Click to select)  Contribution margin  Fixed selling and administrative expenses  Fixed manufacturing overhead  Variable selling and administrative expenses  Net operating income  Sales  Variable cost of goods sold
(Click to select)  Variable cost of goods sold  Variable selling and administrative expenses  Fixed selling and administrative expenses  Contribution margin  Net operating income  Fixed manufacturing overhead  Sales
(Click to select)  Selling and administrative expenses  Variable selling and administrative expenses  Sales  Variable cost of goods sold  Manufacturing overhead  Contribution margin  Net operating income (loss)		$

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

Absorption Costing Income Statement
(Click to select)  Cost of goods sold  Variable selling and administrative expenses  Gross margin  Fixed selling and administrative expenses  Net operating income (loss)  Sales		$
(Click to select)  Sales  Net operating income (loss)  Gross margin  Variable selling and administrative expenses  Fixed selling and administrative expenses  Cost of goods sold
(Click to select)  Net operating income (loss)  Variable selling and administrative expenses  Sales  Fixed selling and administrative expenses  Gross margin  Cost of goods sold
Operating expenses:
(Click to select)  Net operating income (loss)  Cost of goods sold  Gross margin  Sales  Variable selling and administrative expenses  Fixed selling and administrative expenses	$
(Click to select)  Variable selling and administrative expenses  Sales  Net operating income (loss)  Gross margin  Cost of goods sold  Fixed selling and administrative expenses
(Click to select)  Net operating income (loss)  Cost of goods sold  Fixed selling and administrative expenses  Gross margin  Sales  Variable selling and administrative expenses		$

e.	Reconcile the variable costing and absorption costing net operating incomes 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)  Add  Deduct  :  (Click to select)  Fixed manufacturing overhead costs released from inventory under absorption costing  Fixed manufacturing overhead costs deferred in inventory under absorption costing
Absorption costing net operating income	$

Answer 1

1)

Direct material	53
Direct labor	59
Variable overhead	15
Unit cost under variable costing	127

2)

Direct material	53
Direct labor	59
Variable overhead	15
Fixed overhead (89610/3090)	29
Unit cost under absorption costing	156

3)

Contribution margin income statement
sales (2910*193)	561630
less:variable expense
variable cost of sales (127*2910)	369570
variable selling and administrative cost (13*2910)	37830
Total variable cost	(407400)
contribution margin	154230
less:fixed cost
Fixed manufacturing overhead	89610
fixed selling and administrative cost	8730
Total fixed cost	(98340)
net operating income	55890

d)

Absorption costing income statement
sales	561630
cost of goods sold (2910*156)	(453960)
gross margin	107670
less:selling and adminsitrative cost [8730+37830variable)	(46560)
net operating income	61110

e)

variable costing net operating income	55890
add:fixed manufacturing overhead deferred in ending inventory [29*180]	5220
Absorption costing net operating income	61110