In: Accounting
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The Hampton Company produces and sells a single product. The following data refer to the year just completed.
Selling price |
$450 |
Units in beginning inventory |
0 |
Units produced |
25,000 |
Units sold |
22,000 |
Variable costs per unit: |
|
Direct materials |
$150 |
Direct labor |
$75 |
Variable manufacturing overhead |
$25 |
Variable selling and admin |
$15 |
Fixed costs: |
|
Fixed manufacturing overhead |
$275,000 |
Fixed selling and admin |
$200,000 |
Required:
Compute the cost of a single unit of product under both the
absorption costing and variable costing approaches.
Prepare an income statement for the year using absorption
costing.
Prepare an income statement for the year using variable
costing.
1 | ||
Absorption costing: | ||
Direct materials | 150 | |
Direct labor | 75 | |
Variable manufacturing overhead | 25 | |
Fixed manufacturing overhead | 11 | =275000/25000 |
Unit product cost | 261 | |
Variable costing: | ||
Direct materials | 150 | |
Direct labor | 75 | |
Variable manufacturing overhead | 25 | |
Unit product cost | 250 | |
2 | ||
Income statement absorption costing: | ||
Sales | 9900000 | =22000*450 |
Cost of goods sold | 5742000 | =22000*261 |
Gross margin | 4158000 | |
Selling and administrative expenses | 530000 | =200000+(22000*15) |
Net operating income | 3628000 | |
Income statement variable costing: | ||
Sales | 9900000 | |
Variable expenses: | ||
Variable cost of goods sold | 5500000 | |
Variable selling and administrative expenses | 330000 | |
Total Variable expenses | 5830000 | |
Contribution margin | 4070000 | |
Fixed expenses: | ||
Fixed manufacturing overhead | 275000 | |
Fixed selling and administrative expenses | 200000 | |
Total Fixed expenses | 475000 | |
Net operatimg income(loss) | 3595000 | |