Question

Siren Company builds custom fishing lures for sporting goods stores. In its first year of operations, 2017, the company incurred the following costs.

Variable Costs per Unit
Direct materials		$7.58
Direct labor		$3.48
Variable manufacturing overhead		$5.86
Variable selling and administrative expenses		$3.94
Fixed Costs per Year
Fixed manufacturing overhead		$235,290
Fixed selling and administrative expenses		$212,201

Siren Company sells the fishing lures for $25.25. During 2017, the company sold 82,000 lures and produced 93,000 lures.

Assuming the company uses variable costing, calculate Siren’s manufacturing cost per unit for 2017. (Round answer to 2 decimal places, e.g.10.50.)

Manufacturing cost per unit

$

eTextbook and Media

  

  

Prepare a variable costing income statement for 2017. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

SIREN COMPANY Income Statement                                                                       For the Quarter Ended December 31, 2017For the Year Ended December 31, 2017December 31, 2017 Variable Costing
Administrative ExpensesContribution MarginFixed Manufacturing OverheadFixed Selling and Administrative ExpensesGross ProfitNet Income/(Loss)SalesTotal Fixed ExpensesTotal Variable ExpensesVariable Cost of Goods SoldVariable Selling and Administrative Expenses				$
Administrative ExpensesContribution MarginFixed Manufacturing OverheadFixed Selling and Administrative ExpensesGross ProfitNet Income/(Loss)SalesTotal Fixed ExpensesTotal Variable ExpensesVariable Cost of Goods SoldVariable Selling and Administrative Expenses		$
Administrative ExpensesContribution MarginFixed Manufacturing OverheadFixed Selling and Administrative ExpensesGross ProfitNet Income/(Loss)SalesTotal Fixed ExpensesTotal Variable ExpensesVariable Cost of Goods SoldVariable Selling and Administrative Expenses
Administrative ExpensesContribution MarginFixed Manufacturing OverheadFixed Selling and Administrative ExpensesGross ProfitNet Income/(Loss)SalesTotal Fixed ExpensesTotal Variable ExpensesVariable Cost of Goods SoldVariable Selling and Administrative Expenses
Administrative ExpensesContribution MarginFixed Manufacturing OverheadFixed Selling and Administrative ExpensesGross ProfitNet Income/(Loss)SalesTotal Fixed ExpensesTotal Variable ExpensesVariable Cost of Goods SoldVariable Selling and Administrative Expenses
Administrative ExpensesContribution MarginFixed Manufacturing OverheadFixed Selling and Administrative ExpensesGross ProfitNet Income/(Loss)SalesTotal Fixed ExpensesTotal Variable ExpensesVariable Cost of Goods SoldVariable Selling and Administrative Expenses
Administrative ExpensesContribution MarginFixed Manufacturing OverheadFixed Selling and Administrative ExpensesGross ProfitNet Income/(Loss)SalesTotal Fixed ExpensesTotal Variable ExpensesVariable Cost of Goods SoldVariable Selling and Administrative Expenses				$

eTextbook and Media

  

  

Assuming the company uses absorption costing, calculate Siren’s manufacturing cost per unit for 2017. (Round answer to 2 decimal places, e.g.10.50.)

Manufacturing cost per unit

$

Answer 1

Answer- Unit product cost under Variable costing= $16.92 per unit.

Explanation-Unit product cost under Variable costing:-Direct materials + Direct Labor+ Variable manufacturing overhead

=$7.58+$3.48+$5.86

= $16.92 per unit

SIREN COMPANY
Income statement (Using variable costing approach)
Particulars			Amount
			$
Sales (a)	82000 units*$25.25 per unit		2070500
Less:- Variable cost of goods sold (b)
Opening inventory		NIL
Add:- Variable cost of goods manufactured		1573560
Direct materials	93000 units*$7.58 per unit	704940
Direct labor	93000 units*$3.48 per unit	323640
Variable manufacturing overhead	93000 units*$5.86 per unit	544980
Variable cost of goods available for sale		1573560
Less:- Closing inventory	11000 units*$16.92 per unit	186120	1387440
Gross contribution margin C= a-b			683060
Less:-Variable selling & administrative exp.	82000 units*$3.94 per unit		323080
Contribution margin			359980
Less:- Fixed costs
Manufacturing overhead			235290
Selling & administrative exp.			212201
Net Income			-87511

Answer- Unit product cost under Absorption costing= $19.45 per unit.

Explanation- Unit product cost under Absorption costing:-Direct materials + Direct Labor+ Variable manufacturing overhead + fixed manufacturing overhead

=$7.58+$3.48+$5.86+$2.53

= $19.45 per unit

Unit fixed manufacturing overhead= fixed manufacturing overhead/No. of units produced

=$235290/93000 units

=$2.53 per unit