Absorption and Variable Costing with Over- and Underapplied OverheadFlaherty, Inc., has just completed its first year of operations. The unit costs on a normal costing basis are as follows:Manufacturing costs (per unit):Direct materials (3 lbs. @ 1.45)$4.35Direct labor (0,4 hr. @ 14.50)5.80Variable overhead (0.4 hr. @ 5.00)2.00Fixed overhead (0.4 hr. @ 7.00)2.80Total$14 95Selling and administrative costs:Variable$1.70 per unitFixed$218.500During the year, the company had the following activity:Units produced26,000Units sold23,400Unit selling price535Direct labor hours worked10.400Actual fixed overhead was $12,400 less than budgeted fixed overhead. Budgeted variable overhead was $5,900 less than the actual variable overhead. The company used an expected actual activity level of10,400 direct labor hours to compute the predetermined overhead rates. Any overhead variances are closed to Cost of Goods Sold.3. Prepare a variable-costing income statement. Round your answers to the nearest cent.4. Reconcile the difference between the two income statements. Absorption and Variable Costing with Over- and Underapplied OverheadFlaherty, Inc., has just completed its first year of operations. The unit costs on a normal costing basis are as follows:Manufacturing costs (per unit):Direct materials (3 Ibs. @ 1.45)$4.35Direct labor (0.4 hr. @ 14.50)5.80Variable overhead (0.4 hr. @ 5.00)2.00Fixed overhead (0.4 hr. @ 7.00)2.80Total$14.95Selling and administrative costs:Variable$1.70 per unitFixed$218,500During the year, the company had the following activity:Units produced26,000Units sold23,400Unit selling price$35Direct labor hours worked10,400Actual fixed overhead was $12,400 less than budgeted fixed overhead. Budgeted variable overhead was $5,900 less than the actual variable overhead. The company used an expected actual activity level of10,400 direct labor hours to compute the predetermined overhead rates. Any overhead variances are dlosed to Cost of Goods Sold.Required:1. Compute the unit cost using (a) absorption costing and (b) variable costing.Unit Cost15.15 XAbsorption costingVariable costingNextPrevious 3. Prepare a variable-costing income statement. Round your answers to the nearest cent.Flaherty, Inc.Variable-Costing Income StatementFor the First Year of OperationsAdd:Contribution marginLess:Operating incomeFeedbackV Check My WorkUse a contribution margin format income statement that groups costs according to behavior (variable and fixed)4. Reconcile the difference between the two income statements.The absorption costing generates an income $than variable costing.lessFeedback0 0000

A variable costing income statement where all variable expenses are deducted from revenue to arrive…

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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 15E: Flaherty, Inc., has just completed its first year of operations. The unit costs on a normal costing...

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Absorption and Variable Costing with Over- and Underapplied Overhead Flaherty, Inc., has just completed its first year of operations. The unit costs on a normal costing basis are as follows: Manufacturing costs (per unit): Direct materials (3 lbs. @ 1.45) $4.35 Direct labor (0,4 hr. @ 14.50) 5.80 Variable overhead (0.4 hr. @ 5.00) 2.00 Fixed overhead (0.4 hr. @ 7.00) 2.80 Total $14 95 Selling and administrative costs: Variable $1.70 per unit Fixed $218.500 During the year, the company had the following activity: Units produced 26,000 Units sold 23,400 Unit selling price 535 Direct labor hours worked 10.400 Actual fixed overhead was $12,400 less than budgeted fixed overhead. Budgeted variable overhead was $5,900 less than the actual variable overhead. The company used an expected actual activity level of 10,400 direct labor hours to compute the predetermined overhead rates. Any overhead variances are closed to Cost of Goods Sold. 3. Prepare a variable-costing income statement. Round your answers to the nearest cent. 4. Reconcile the difference between the two income statements.

3. Prepare a variable-costing income statement. Round your answers to the nearest cent.
Flaherty, Inc.
Variable-Costing Income Statement
For the First Year of Operations
Add:
Contribution margin
Less:
Operating income
Feedback
V Check My Work
Use a contribution margin format income statement that groups costs according to behavior (variable and fixed)
4. Reconcile the difference between the two income statements.
The absorption costing generates an income $
than variable costing.
less
Feedback
0 00
00

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