1. Calculate the unit product cost under: a. Absorption costing. b. Variable costing. 2. Calculate variable costing income statements for July and August. 3. Compute the variable costing and absorption costing net operating incomes.
1. Calculate the unit product cost under: a. Absorption costing. b. Variable costing. 2. Calculate variable costing income statements for July and August. 3. Compute the variable costing and absorption costing net operating incomes.
Chapter5: Process Costing
Section: Chapter Questions
Problem 2PB: The following product costs are available for Kellee Company on the production of eyeglass frames:...
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Denton Company manufactures and sells a single product. Cost data for the product are given:
Variable costs per unit: | ||||
Direct materials | $ | 7 | ||
Direct labor | 10 | |||
Variable manufacturing overhead | 5 | |||
Variable selling and administrative | 3 | |||
Total variable cost per unit | $ | 25 | ||
Fixed costs per month: | ||||
Fixed manufacturing overhead | $ | 315,000 | ||
Fixed selling and administrative | 245,000 | |||
Total fixed cost per month | $ | 560,000 | ||
The product sells for $60 per unit. Production and sales data for July and August, the first two months of operations, follow:
Units Produced |
Units Sold |
|
July | 17,500 | 15,000 |
August | 17,500 | 20,000 |
The company’s Accounting Department has prepared the following absorption costing income statements for July and August:
Sales | $ | 900,000 | $ | 1,200,000 | |
Cost of goods sold | 600,000 | 800,000 | |||
Gross margin | 300,000 | 400,000 | |||
Selling and administrative expenses | 290,000 | 305,000 | |||
Net operating income | $ | 10,000 | $ | 95,000 |
1. Calculate the unit product cost under:
a. Absorption costing.
b. Variable costing.
2. Calculate variable costing income statements for July and August.
3. Compute the variable costing and absorption costing net operating incomes.
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