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27 May 2021
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SASI BICYCLE produces an expensive, yet rugged, bicycle for use in the city’s crowded streets that it sells for P500. Selected data for the company’s operation last year follows
Units in beginning inventory 0
Units produced during the year 10,000
Units sold during the year 8,000
Units in ending inventory 2,000
Variable cost sper unit:
Direct Materials P120
Direct labor 140
Variable manufacturing Overhead 50
Variable Selling and administrative 20
Fixed Costs:
Fixed manufacturing Overhead P600,000
Fixed Selling and administrative P400,000
Assume the company uses absorption costing.
Compute the unit product cost in each year.
Direct Materials _____
Direct labor _____
Variable manufacturing Overhead _____
Fixed manufacturing Overhead _____
Absorption costing product cost _____
Prepare an income statement of each year.
Sales _____
Less: Cost of Goods Sold _____
Gross Margin _____
Less: Selling and administrative expenses _____
Net operating income (loss) _____
Assume the company uses variable costing.
Compute the unit product cost in each year.
Direct Materials _____
Direct labor _____
Variable manufacturing Overhead _____
Variable costing product cost _____
Prepare an income statement of each year.
Sales _____
Less: Variable Expenses:
Variable COGS _____
Variable S&A Expenses _____ _____
Contribution Margin _____
Less: Fixed Expenses
Fixed MOH _____
Fixed S&A Expenses _____ _____
Net operating income (loss) _____
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SASI BICYCLE produces an expensive, yet rugged, bicycle for use in the city’s crowded streets that it sells for P500. Selected data for the company’s operation last year follows
Units in beginning inventory 0
Units produced during the year 10,000
Units sold during the year 8,000
Units in ending inventory 2,000
Variable cost sper unit:
Direct Materials P120
Direct labor 140
Variable manufacturing Overhead 50
Variable Selling and administrative 20
Fixed Costs:
Fixed manufacturing Overhead P600,000
Fixed Selling and administrative P400,000
Assume the company uses absorption costing.
Compute the unit product cost in each year.
Direct Materials _____
Direct labor _____
Variable manufacturing Overhead _____
Fixed manufacturing Overhead _____
Absorption costing product cost _____
Prepare an income statement of each year.
Sales _____
Less: Cost of Goods Sold _____
Gross Margin _____
Less: Selling and administrative expenses _____
Net operating income (loss) _____
Assume the company uses variable costing.
Compute the unit product cost in each year.
Direct Materials _____
Direct labor _____
Variable manufacturing Overhead _____
Variable costing product cost _____
Prepare an income statement of each year.
Sales _____
Less: Variable Expenses:
Variable COGS _____
Variable S&A Expenses _____ _____
Contribution Margin _____
Less: Fixed Expenses
Fixed MOH _____
Fixed S&A Expenses _____ _____
Net operating income (loss) _____
Related questions
The Dorset Corporation produces and sells a single product. The following data refer to the year just completed:
| Beginning inventory | 0 | |
| Units produced | 34,000 | |
| Units sold | 25,900 | |
| Selling price per unit | $ | 482 |
| Selling and administrative expenses: | ||
| Variable per unit | $ | 16 |
| Fixed per year | $ | 362,600 |
| Manufacturing costs: | ||
| Direct materials cost per unit | $ | 240 |
| Direct labor cost per unit | $ | 56 |
| Variable manufacturing overhead cost per unit | $ | 34 |
| Fixed manufacturing overhead per year | $ | 578,000 |
Assume that direct labor is a variable cost.
Required:
a. Compute the unit product cost under both the absorption costing and variable costing approaches.
b. Prepare an income statement for the year using absorption costing.
c. Prepare an income statement for the year using variable costing.
d. Reconcile the absorption costing and variable costing net operating income figures in (b) and (c) above.
