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Chapter 21: Q16E (page 1171)

Question: Preparing variable costing income statements, production exceeds sales

ReVitalAde produced 13,000 cases of powdered drink mix and sold 12,000 cases in April 2018. The sales price was \(29, variable costs were \)12 per case (\(9 manufacturing and \)3 selling and administrative), and total fixed costs were \(100,000 (\)91,000 manufacturing overhead and $9,000 selling and administrative). The company had no beginning Finished Goods Inventory.

Requirements:

  1. Prepare the April income statement using variable costing.
  2. Determine the product cost per unit and the total cost of the 1,000 cases in Finished Goods Inventory as of April 30.

Short Answer

Expert verified

Answer

  1. Operating income is $104,000
  2. Total unit product cost is $9 and finished goods inventory is $9,000.

Step by step solution

01

Income statement using variable costing

Particulars

Amount

Net sales revenue ($29x12,000)

$348,000

Less: Variable costs ($12x12,000)

$144,000

Contribution margin

$204,000

Less: Fixed costs

Fixed costs of goods sold

$91,000

Fixed selling and administrative cost

$9,000

Operating Income

$104,000

02

Calculation of product cost per unit and total cost of 1,000 cases in finished goods inventory as of April 30.

Particulars

Amount

Variable manufacturing cost

$9

Total unit product cost

$9

Finished goods inventory, ending balance ($9x1,000)

$9,000

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Most popular questions from this chapter

Classifying costs Classify each cost by placing an X in the appropriate columns. The first cost is completed as an example.

Absorption Costing Variable Costing Product Cost Period Cost Product Cost Period cost

  1. Direct materials
  2. Direct labor
  3. Variable manufacturing overhead
  4. Fixed manufacturing overhead
  5. Variable selling and administrative costs
  6. Fixed selling and administrative cost

Question: Computing absorption costing operating income

Refer to the information for Concord, Inc.

Requirements

  1. Using absorption costing, calculate the unit product cost.
  2. Prepare an income statement using the traditional format.

Use the following information for Exercises E21-14 and E21-15.

Concord, Inc. has collected the following data for November (there are no beginning inventories):

Units produced and sold 500 units Sales price $ 450 per unit Direct materials 64 per unit Direct labor 68 per unit Variable manufacturing overhead 26 per unit Fixed manufacturing overhead 7,500 per month Variable selling and administrative costs 15 per unit Fixed selling and administrative costs 4,400 per month

Computing absorption cost per unit and variable cost per unit

Adamson, Inc. has the following cost data for Product X:

Direct materials $ 41 per unit Direct labor 57 per unit Variable manufacturing overhead 7 per unit Fixed manufacturing overhead 20,000 per year

Calculate the unit product cost using absorption costing and variable costing when production is 2,000 units, 2,500 units, and 5,000 units.

Using absorption and variable costing

Meyer Company reports the following information for March:

Net Sales Revenue $ 45,300

Variable Cost of Goods Sold 12,500

Fixed Cost of Goods Sold 11,800

Variable Selling and Administrative Costs 14,000

Fixed Selling and Administrative Costs 5,400

Requirements:

  1. Calculate the gross profit and operating income for March using absorption costing.
  2. Calculate the contribution margin and operating income for March using variable costing.

Setting sales prices The Sweet Treats Company manufactures candy that is sold to food distributors. The company produces at full capacity for six months each year to meet peak demand during the 鈥渃andy season鈥� from Halloween through Valentine鈥檚 Day. During the other six months of the year, the manufacturing facility operates at 75% of capacity. The Sweet Treats Company provides the following data for the year:

Cases of candy produced and sold 1,800,000 cases Sales price $ 37.00 per case Variable manufacturing costs 20.00 per case Fixed manufacturing costs 6,400,000 per year Variable selling and administrative costs 2.00 per case Fixed selling and administrative costs 3,500,000 per year The Sweet Treats Company receives an offer to produce 13,000 cases of candy for a special event. This is a one-time opportunity during a period when the company has excess capacity. What is the minimum sales price The Sweet Treats Company should accept for the order? Explain why
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