Question

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

Selling Price $121

Units in beginning inventory 300

Units produced 6900

Units sold    7100

Units in ending inventory   100

Variable costs per unit:

Direct materials $36

Direct labor $43

Variable manufacturing overhead $3

Variable selling and administrative $11

Fixed Costs:

Fixed manufacturing overhead $131100

Fixed selling and administrative  $49700

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.

Required;  (present with no decimal places) :

What is the unit product cost for the month under variable costing? $

Determine the absorption costing net operating income for the month. $

Answer 1

Part - 1:

Computation the unit product cost under variable costing is:

Unit product cost under variable cost = Value of material per unit + Value of variable overhead per unit + Value of labor per unit

= $36 + $3 + $43

= $82

Hence, the unit product cost under variable costing is $82.

Part - 2:

Computation of operating income is:

Operating income = Value of gross profit - Total expenses of selling and administrative

= $142,000 - $127,800

= $14,200

Hence, the operating income is $14,200.

Working notes:

a.

Computation the value of fixed overhead per unit is:

Value of fixed overhead per unit = Total value of fixed overhead / Number of units produced

= $131,100 / 6,900

= $19

Hence, the value of fixed overhead per unit is $19.

b.

Computation the total cost per unit is:

Total cost per unit = Value of material per unit + Value of variable overhead per unit + Value of fixed overhead per unit + Value of labor per unit

= $36 + $3 + $19 + $43

= $101

Hence, the total cost per unit is $101.

c.

Computation the value of sales is:

Value of sales = Number of units sold * Value of sales per unit

= 7,100 * $121

= $859,100

Hence, the value of sales is $859,100.

d.

Computation the value of cost of goods sold is:

Cost of goods sold = Number of units sold * cost per unit under absorption costing

= 7,100 * $101

= $717,100

Hence, the value of cost of goods sold is $717,100.

e.

Computation the value of variable expense of selling and administrative is:

Value of variable expense of selling and administrative = Number of units sold * Value of variable expense of selling and administrative per unit

= 7,100 * $11

= $78,100

Hence, the value of variable expense of selling and administrative is $78,100.

f.

Computation the total expenses of selling and administrative is:

Total expenses of selling and administrative = Value of variable expense of selling and administrative + Value of fixed expense of selling and administrative

= $78,100 + $49,700

= $127,800

Hence, the total expenses of selling and administrative is $127,800.

g.

Computation the value of gross profit is:

Value of gross profit = Value of sales - Value of cost of goods sold

= $859,100 - $717,100

= $142,000

Hence, the value of gross profit is $142,000.