Question

1. Whitehall Company sells a single product for $25. It had no beginning inventories. Operating data follow.

Sales, 27,000 units                                    $675,000

Normal capacity                                    30,000 units

Production costs:

Variable per unit                                        $13

Fixed production                                    $150,000

Selling and administrative expenses:

Variable per unit sold                                    $2

Fixed selling                                        $20,000

Number of units produced                           32,500 units

Assume the actual costs were as budgeted.

a.Find contribution margin per unit.

b.Compute the ending inventory under standard variable costing.

c.Compute the income under standard variable costing.

Assume standard absorption costing using normal capacity as the basis for computing the standard fixed cost per unit. Compute

d.Standard gross profit per unit.

e.Ending inventory.

f.Volume variance.

g.Income.

2. Lund Company sells a single product for $25. It had no beginning inventories. Operating data follow.

Sales, 55,000 units                                  $1,375,000

Normal capacity                                    60,000 units

Production costs:

Variable per unit                                        $13

Fixed production                                    $300,000

Selling and administrative expenses:

Variable per unit sold                                    $2

Fixed selling                                        $40,000

Number of units produced                           66,000 units

Assume the actual costs were as budgeted.

a. Compute income under standard variable costing.

b. Compute income under standard absorption costing.

3. Maiden Rock Company sells a single product for $25. It had no beginning inventories. Operating data follow.

Sales, 20,000 units                                    $500,000

Normal capacity                                    30,000 units

Production costs:

Variable per unit                                        $13

Fixed production                                    $150,000

Selling and administrative expenses:

Variable per unit sold                                    $2

Fixed selling                                        $20,000

Number of units produced                           32,500 units

Assume the actual costs were as budgeted.

a.Find Maiden Rock’s income under standard variable costing.

b.Find Maiden Rock’s income under standard absorption costing.

Answer 1

Whitehall Company
Sales
Unit	27000
Sales Price / Unit	25
Total Sales	675000
Production
Capacity	30000
Produced	32500
Variable Production Cost per Unit	13
Variable Selling & Administrative Cost per Unit	2
Fixed Production Cost	150000
Fixed Selling & Administrative Cost	20000
a) Contribution margin per unit
Sales Price / Unit	25
Variable Production Cost per Unit	13
Variable Selling & Administrative Cost per Unit	2
Contribution margin per Unit	10
b) Ending Inventory Under standard Variable Costing
Inventory Produced	32500
Inventory Sold	27000
Balance Inventory	5500
Variable Cost per Unit	13
Ending Inventory Under standard variable costing	71500
C ) Income under standard variable costing
Sales Price / Unit	25
Variable Production Cost per Unit	13
Variable Selling & Administrative Cost per Unit	2
Contribution margin per Unit	10
Unit Sold	27000
Income Under variabe costing	270000
On the basis of absorption costing using normal capacity then
Fixed Production cost per Unit (150000/30000)	5
d. Standard Gross Profit per Unit
Sales Price / Unit	25
Variable Production Cost per Unit	13
Fixed Production cost per Unit (150000/30000)	5
Standard Gross Profit per Unit	7
e. Ending Inventory
Inventory Produced	32500
Inventory Sold	27000
Balance Inventory	5500
Cost per Unit (Fixed & Variable)	18
Ending Inventory	99000
f. Volume variance
Inventory Sold	27000
Budgeted Inventory	30000
Difference	-3000
Cost per Unit (Fixed & Variable)	18
Volume Variance	-54000
g. Income
Sales Price / Unit	25
Variable Production Cost per Unit	13
Fixed Production Cost per Unit	5
Variable Selling & Administrative Cost per Unit	2
Fixed Selling & Administrative Cost per Unit	0.67
Contribution margin per Unit	4.33
Unit Sold	27000
Income	117000
Lund Company
Sales
Unit	55000
Sales Price / Unit	25
Total Sales	1375000
Production
Capacity	60000
Produced	66000
Variable Production Cost per Unit	13
Variable Selling & Administrative Cost per Unit	2
Fixed Production Cost	300000
Fixed Selling & Administrative Cost	40000
a ) Income under standard variable costing
Sales Price / Unit	25
Variable Production Cost per Unit	13
Variable Selling & Administrative Cost per Unit	2
Contribution margin per Unit	10
Unit Sold	55000
Income Under variable costing	550000
On the basis of absorption costing using then
Fixed Production cost per Unit (300000/66000)	4.55
b ) Income under standard absorbtion costing
Sales Price / Unit	25
Variable Production Cost per Unit	13
Variable Selling & Administrative Cost per Unit	2
Fixed Production Cost per unit (300000/66000)	4.55
Fixed Selling & Administrative Cost per Unit (40000/55000)	0.73
Contribution margin per Unit	4.72
Unit Sold	55000
Income uner standard absorbtion costing	2,59,750.00
Maiden Rock Company
Sales
Unit	20000
Sales Price / Unit	25
Total Sales	500000
Production
Capacity	30000
Produced	32500
Variable Production Cost per Unit	13
Variable Selling & Administrative Cost per Unit	2
Fixed Production Cost	150000
Fixed Selling & Administrative Cost	20000
a ) Income under standard variable costing
Sales Price / Unit	25
Variable Production Cost per Unit	13
Variable Selling & Administrative Cost per Unit	2
Contribution margin per Unit	10
Unit Sold	20000
Income Under variable costing	200000
b ) Income under standard absorbtion costing
Sales Price / Unit	25
Variable Production Cost per Unit	13
Variable Selling & Administrative Cost per Unit	2
Fixed Production Cost per unit (150000/32500)	4.62
Fixed Selling & Administrative Cost per Unit (20000/20000)	1.00
Contribution margin per Unit	4.38
Unit Sold	20000
Income uner standard absorbtion costing	87,692.31