A manufacturing company that produces a single product has provided the following data related to its operations during May: Manufacturing costs: Variable costs per unit: Direct materials $22.50 Direct labor $20.00 Variable manufacturing overhead Fixed manufacturing overhead costs (total) $7.50 $875,000 Selling and administrative costs: Variable per unit Fixed (total) $5.00 $900,000 The product sells for $125 per unit. The company produced 35,000 units and sold 30,000 units in May. There is no beginning inventory. Required: a) Compute the breakeven sales dollars and margin of safety in sales dollars. b) Determine the unit product cost under: i. Absorption costing. ii. Variable costing. c) Prepare an income statement for the month using absorption costing. d) Prepare a contribution format income statement for the month using variable costing. e) Reconcile the variable costing and absorption costing net operating incomes in (c) and (d) above. f) Suppose the company had same production volume in the following month, June but sold all units, making no ending inventory left. Fixed and variable manufacturing costs kept unchanged. Suppose the net income under Variable costing is $2,025,000. Compute the net income absorption costing. (Income statement is NOT required.)
A manufacturing company that produces a single product has provided the following data related to its operations during May: Manufacturing costs: Variable costs per unit: Direct materials $22.50 Direct labor $20.00 Variable manufacturing overhead Fixed manufacturing overhead costs (total) $7.50 $875,000 Selling and administrative costs: Variable per unit Fixed (total) $5.00 $900,000 The product sells for $125 per unit. The company produced 35,000 units and sold 30,000 units in May. There is no beginning inventory. Required: a) Compute the breakeven sales dollars and margin of safety in sales dollars. b) Determine the unit product cost under: i. Absorption costing. ii. Variable costing. c) Prepare an income statement for the month using absorption costing. d) Prepare a contribution format income statement for the month using variable costing. e) Reconcile the variable costing and absorption costing net operating incomes in (c) and (d) above. f) Suppose the company had same production volume in the following month, June but sold all units, making no ending inventory left. Fixed and variable manufacturing costs kept unchanged. Suppose the net income under Variable costing is $2,025,000. Compute the net income absorption costing. (Income statement is NOT required.)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter18: Pricing And Profitability Analysis
Section: Chapter Questions
Problem 3CE: Pattison Products, Inc., began operations in October and manufactured 40,000 units during the month...
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Transcribed Image Text:A manufacturing company that produces a single product has provided the following data related
to its operations during May:
Manufacturing costs:
Variable costs per unit:
Direct materials
$22.50
Direct labor
$20.00
Variable manufacturing overhead
Fixed manufacturing overhead costs (total)
$7.50
$875,000
Selling and administrative costs:
Variable per unit
Fixed (total)
$5.00
$900,000
The product sells for $125 per unit. The company produced 35,000 units and sold 30,000 units
in May. There is no beginning inventory.
Required:
a) Compute the breakeven sales dollars and margin of safety in sales dollars.
b) Determine the unit product cost under:
i. Absorption costing.
ii. Variable costing.
c) Prepare an income statement for the month using absorption costing.
d) Prepare a contribution format income statement for the month using variable costing.
e) Reconcile the variable costing and absorption costing net operating incomes in (c) and (d)
above.
f) Suppose the company had same production volume in the following month, June but sold all
units, making no ending inventory left. Fixed and variable manufacturing costs kept
unchanged. Suppose the net income under Variable costing is $2,025,000. Compute the net
income absorption costing. (Income statement is NOT required.)
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