ACCT-3030 Study Guide - Final Guide: Earnings Before Interest And Taxes, Product Manager
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Your Company manufactures and sells one product. The sellingprice per unit is $80 per unit. The following pertains to thecompany's first year of operations in which it produced 40,000 andsold 35,000 units.
Variable costs: | |
Manufacturing: | |
Direct materials | 960,000 |
Direct labor | 560,000 |
Variable manufacturing overhead | 80,000 |
Variable selling | 140,000 |
Fixed Costs per year: | |
Fixed manufacturing | 840,000 |
Fixed selling and administrative | 490,000 |
Instructions: | |
1.Using the above information prepare | |
an income statement in the traditional | |
format. | |
2. Prepare an income statement in the | |
contribution format. | |
3. Compute the unit cost under absorption costing. | |
4. Compute the unit cost under variable costing. | |
5. Compute the contribution margin per unit. | |
6. Compute the contribution margin ratio | |
7. There is a difference in the net income using one | |
statement versus the other; explain the | |
cause of the difference? | |
8. Compute the breakeven sales in units 9. Compute the breakeven sales dollars. |
Denton Company manufactures and sells a single product. Cost data for the product are given:
Variable costs per unit: | ||||
Direct materials | $ | 3 | ||
Direct labor | 10 | |||
Variable manufacturing overhead | 3 | |||
Variable selling and administrative | 1 | |||
Total variable cost per unit | $ | 17 | ||
Fixed costs per month: | ||||
Fixed manufacturing overhead | $ | 63,000 | ||
Fixed selling and administrative | 160,000 | |||
Total fixed cost per month | $ | 223,000 | ||
The product sells for $46 per unit. Production and sales data for July and August, the first two months of operations, follow:
Units Produced | Units Sold | |
July | 21,000 | 17,000 |
August | 21,000 | 25,000 |
The companyâs Accounting Department has prepared the following absorption costing income statements for July and August:
July | August | ||||
Sales | $ | 782,000 | $ | 1,150,000 | |
Cost of goods sold | 323,000 | 475,000 | |||
Gross margin | 459,000 | 675,000 | |||
Selling and administrative expenses | 177,000 | 185,000 | |||
Net operating income | $ | 282,000 | $ | 490,000 | |
Required:
1. Determine the unit product cost under:
a. Absorption costing.
b. Variable costing.
2. Prepare contribution format variable costing income statements for July and August.
3. Reconcile the variable costing and absorption costing net operating incomes.
Denton Company manufactures andsells a single product. Cost data for the product are givenbelow: |
Variable costs perunit: | ||
Direct materials | $4 | |
Direct labor | 12 | |
Variable manufacturingoverhead | 4 | |
Variable selling andadministrative | 1 | |
Total variable costsper unit | $21 | |
Fixed costs permonth: | ||
Fixed manufacturingoverhead | $ | 108,000 |
Fixed selling andadministrative | 175,000 | |
Total fixed cost permonth | $ | 283,000 |
The product sells for $54 per unit. Production and sales datafor July and August, the first two months of operations, are asfollows: |
Units Produced | Units Sold | |
July | 27,000 | 23,000 |
August | 27,000 | 31,000 |
The companyâs Accounting Department has prepared absorptioncosting income statements for |
July | August | ||||
Sales | $ | 1,242,000 | $ | 1,674,000 | |
Cost of goodssold | 552,000 | 744,000 | |||
Gross margin | 690,000 | 930,000 | |||
Selling andadministrative expenses | 198,000 | 206,000 | |||
Net operatingincome | $ | 492,000 | $ | 724,000 | |
2. Prepare contribution format variable costing incomestatements for July and August.
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