Question

A business operated at 100% of capacity during its first month and incurred the following costs:

Production costs (18,600 units):
Direct materials	$172,100
Direct labor	234,800
Variable factory overhead	267,600
Fixed factory overhead	100,300	$774,800
Operating expenses:
Variable operating expenses	$131,500
Fixed operating expenses	46,900	178,400

If 1,800 units remain unsold at the end of the month, what is the amount of inventory that would be reported on the variable costing balance sheet?

The actual price for a product was $43 per unit, while the planned price was $40 per unit. The volume increased by 4,040 to 57,320 total units. Determine the (a) the quantity factor and (b) the price factor for sales.

a. Quantity factor	$
b. Price factor	$

A business operated at 100% of capacity during its first month and incurred the following costs:

Production costs (5,000 units):
Direct materials	$70,000
Direct labor	20,000
Variable factory overhead	10,000
Fixed factory overhead	2,000	$102,000
Operating expenses:
Variable operating expenses	$17,000
Fixed operating expenses	1,000	18,000

If 1,000 units remain unsold at the end of the month and sales total $150,000 for the month, what is the amount of the manufacturing margin that would be reported on the absorption costing income statement?

A business operated at 100% of capacity during its first month, with the following results:

Sales (96 units)		$480,000
Production costs (120 units):
Direct materials	$60,000
Direct labor	15,000
Variable factory overhead	27,000
Fixed factory overhead	24,000	126,000
Operating expenses:
Variable operating expenses	$6,100
Fixed operating expenses	3,770	9,870

What is the amount of the income from operations that would be reported on the variable costing income statement?

hiladelphia Company has the following information for March:

Sales	$491,777
Variable cost of goods sold	218,423
Fixed manufacturing costs	77,238
Variable selling and administrative expenses	52,488
Fixed selling and administrating expenses	37,209

a. Determine the March manufacturing margin.
$

b. Determine the March contribution margin.
$

c. Determine the March income from operations for Philadelphia Company.
$

A business operated at 100% of capacity during its first month, with the following results:

Sales (160 units)		$160,000
Production costs (200 units):
Direct materials	$100,000
Direct labor	20,000
Variable factory overhead	10,000
Fixed factory overhead	4,000	134,000
Operating expenses:
Variable operating expenses	$ 12,000
Fixed operating expenses	2,000	14,000

What is the amount of the manufacturing margin that would be reported on the variable costing income statement?

a.$30,000

b.$56,000

c.$44,000

d.$38,000

Answer 1

Answer to Question:

Computation of Total Cost under Variable Costing:

Particulars	Amount($)
Direct Material	172100
Direct Labor	234800
Variable Factory Overhead	267600
Total cost under Variable costing	674500

Total units produced = 18600

Cost per unit =$674500/18600 = $ 36.26

Amount of Inventory that would be reported on variable costing basis when 1800 units remain unsold = 1800 units * $36.26

= $65274   

Note: Under Variable Costing Method, only Variable Manufacturing cost like direct material, direct labor,and variable manufacturing overhead are considered as product cost. All other cost whether administrative or selling are considered as period costs .

Answer to Question:

Actual Price =$43

Planned Price = $40

Actual Units sold= 57320

Planned Units of sale= 53280

a) Quantity factor for sales = ( Actual Units sold - Planned Units of sale)* Planned Sale price = (57320-53280)*$40 = $161600

b) Price factor for sales = (Planned price - Actual price) * Planned Unit of sale = $(43-40)*53280 = $159840

Answer to Question:

Total Cost under Absorption Costing:-

Particulars	Amount($)
Direct Material	70000
Direct Labor	20000
Variable Factory Overhead	10000
Fixed Factory Overhead	2000
Total cost under Absorption costing	102000

Total units produced = 5000

Cost per unit =$102000/5000 = $ 20.4

Cost of 4000 units = 4000*$ 20.4 = $81600

Sales of 4000 units = $150000

Amount of Manufacturing Margin = $68400

Answer to Question:

Amount of income from operations that would be reported on variable costing basis:

Computation of Total Cost under Variable Costing:

Particulars	Amount($)
Direct Material	60000
Direct Labor	15000
Variable Factory Overhead	27000
Total cost under Variable costing	102000

No of units produced = 120

Variable Cost per unit = 102000/120 = $850

Computation of Income from Operations:

Particulars	Amount($)
Sales 96 units@5000	480000
Variable cost 96 units @ 850	(81600)
Gross Margin	398400
Less: Variable Operating Exp	(6100)
Fixed POH	(24000)
Fixed operating exp	(9870)
Income from operation under variable costing	358430

Answer to Question:

Computation of Income from Operations:

Particulars	Amount($)
Sales	491777
Variable cost of goods sold	(218423)
Manufacturing Margin	273354
Less: Variable Selling& Adm Exp	(52488)
Contribution Margin	220866
Less: Fixed Manufacturing Cost	(77238)
Fixed Selling &Adm Exp	(37209)
Income from Operations	106329

  

Answer to Question:

Total Unit sold = 160

Total Unit Produced = 200

Ratio of Sales to production = 160/200*100 = 80%

Proportionate Variable Cost on the sales level of 160 units =

(Direct Material *80/100) + (Direct Labor*80/100) + (Variable Factory Overhead*80/100)

= ($100000*80/100) + ($20000*80/100)+ ($10000*80/100)

= $80000+ $ 16000 + $8000

= $104000

Sales @160 units = $ 160000

Less: Variable Cost = $ 104000

Manufacturing Margin = $54000

Marginal Cost is the change in cost of product as output increases also known as variable cost. All the cost have been converted on the basis of sales except variable operating cost as variable operating cost is a part of variable cost but does not help in getting raw material get converted into finished goods so it has been excluded while determining manufacturinf margin.