Question

In: Accounting

Variable Costing

Using Variable Costing to prepare an Income Statement and using the same method to calculate the Unit Production Cost.

Solutions

Expert Solution

The Income Statement is prepared only for the number of units sold.
 
Sales Revenue = No of Cases Sold x Sale Price per Case = 12000 x $29 = $348,000
 
Variable Manufacturing Cost = No of Cases Sold x Variable Manufacturing Cost per case = 12000x $9 = $108,000
 
Variable Selling Cost = No of Cases Sold x Variable Selling Cost per Case = 12,000 x $3 = $36,000
 
In Variable Costing, the Product Cost is made up of only the Variable Expenses incurred. The Fixed Expenses are only expenses in the Income Statement.
Product Cost (Unit)
Variable Manufacturing Cost
$9
Variable Selling Expense
$3
Unit Product Cost
$12
Sales Revenue=No of Cases Sold x Sale Price per Crate=12,000×$29=$348,000
Cost of Ending Inventory = (Produced Units - Sold Units) x Unit Product Cost = (13000-12000) x $12 = $12,000
ReVitalAde
Income Statement (Variable Costing)
Month ended April 30
Sales Revenue
 
$348,000
Less: Variable Expenses
 
 
Variable Manufacturing Expenses
$108,000
 
Variable Selling Expenses
$36,000
$144,000
Contribution
 
$204,000
Less: Fixed Expenses
 
 
Fixed Manufacturing Expenses
$91,000
 
Fixed Selling Expenses
$9,000
$100,000
Operating Income
 
$104,000

 

The cost per unit is $10 and the total cost of the 1,000 cases in Finished Goods Inventory as of April 30 is $12,000.
Variable Manufacturing Cost=No of Cases Sold x V
Variable Selling Cost=No of Cases Sold x Variable Selling Cost per case=12,000×$3=$3

The Net Operating Income is $104,000.

The Cost per Unit comes to $10 and the cost of the Ending Inventory is $12,000.

Soumik Mallick Choudhury answered 3 years ago
Next > < Previous

Related Solutions

What is variable costing and how are variable costing and absorption costing used for different purposes?...
What is variable costing and how are variable costing and absorption costing used for different purposes? Why is net income different when variable costing is used rather than absorption costing?
Explain the difference between variable costing and absorption costing. Describe the limitations of using variable costing....
Explain the difference between variable costing and absorption costing. Describe the limitations of using variable costing. Describe the limitations of using absorption costing. What difference do you notice on the income statement when prepared with absorption costing versus variable costing? "Managerial Accounting"
Absorption and variable costing:
The Dorset Corporation produces and sells a single product. The following data refer to the year just completed:Beginning inventory 0Units produced 9,000Units sold 7,000Selling price per unit $ 47Selling and administrative expenses:Variable per unit $ 4Fixed per year $ 58,000Manufacturing costs:Direct materials cost per unit $ 10Direct labor cost per unit $ 6Variable manufacturing overhead cost per unit $ 5Fixed manufacturing overhead per year $ 90,000Assume that direct labor is a variable cost.Required:a. Prepare an income statement for the year...
Variable Costing: Compare and contrast variable costing with absorption costing, highlighting the differences between operating income....
Variable Costing: Compare and contrast variable costing with absorption costing, highlighting the differences between operating income. Discuss the use of variable costing for decision making in a manufacturing company and a service company.
Variable Costing: Compare and contrast variable costing with absorption costing, highlighting the differences between operating income....
Variable Costing: Compare and contrast variable costing with absorption costing, highlighting the differences between operating income. Discuss the use of variable costing for decision making in a manufacturing company and a service company.
1. Variable Costing: Compare and contrast variable costing with absorption costing, highlighting the differences between operating...
1. Variable Costing: Compare and contrast variable costing with absorption costing, highlighting the differences between operating income. Discuss the use of variable costing for decision making in a manufacturing company and a service company.
difference between absorption costing and variable costing
What is the difference between absorption costing and variable costing, and how can the choice between these two methods impact a company's reported profits and financial performance?
Absorption, variable, and throughput costing
Absorption, variable, and throughput costing EnRG Inc. produces trail mix packaged for sale in convenience stores in the Northeast section of the United States. At the beginning of April 2008, EnRG has no inventory of trail mix. Demand for the next three months is expected to remain constant at 50,000 bags per month. EnRG plans to produce to demand, 50,000 bags in April. However, many of the employees take vacation in June, so EnRG plans to produce 70,000 bags in...
how are absorption costing and variable costing the same?How are they different?
how are absorption costing and variable costing the same?How are they different?
Two observations can be made about variable and absorption costing. First, a variable costing income statement...
Two observations can be made about variable and absorption costing. First, a variable costing income statement classifies cost based on behavior, variable or fixed. An absorption costing income statement classifies cost based on nature (use in manufacturing or selling and administration, etc.). Second, in variable costing income statements, fixed manufacturing costs are excluded from inventoriable costs. In absorption costing income statements, fixed manufacturing costs are included in inventoriable costs. Many large companies prepare both kinds of income statements. For what...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT