Diego Company manufactures one product that is sold for $72 per unit in two geographic regions—the East and West regions. The following information pertains to the company’s first year of operations in which it produced 43,000 units and sold 38,000 units. Variable costs per unit: Manufacturing: Direct materials $ 22 Direct labor $ 14 Variable manufacturing overhead $ 3 Variable selling and administrative $ 5 Fixed costs per year: Fixed manufacturing overhead $ 774,000 Fixed selling and administrative expense $ 346,000 The company sold 28,000 units in the East region and 10,000 units in the West region. It determined that $170,000 of its fixed selling and administrative expense is traceable to the West region, $120,000 is traceable to the East region, and the remaining $56,000 is a common fixed expense. The company will continue to incur the total amount of its fixed manufacturing overhead costs as long as it continues to produce any amount of its only product. Required: 1. What is the unit product cost under variable costing? 2. What is the unit product cost under absorption costing? 3. What is the company’s total contribution margin under variable costing? 4. What is the company’s net operating income (loss) under variable costing? 5. What is the company’s total gross margin under absorption costing? 6. What is the company’s net operating income (loss) under absorption costing?
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
[The following information applies to the questions displayed below.]
Diego Company manufactures one product that is sold for $72 per unit in two geographic regions—the East and West regions. The following information pertains to the company’s first year of operations in which it produced 43,000 units and sold 38,000 units.
| Variable costs per unit: | ||
| Manufacturing: | ||
| Direct materials | $ | 22 |
| Direct labor | $ | 14 |
| Variable manufacturing overhead | $ | 3 |
| Variable selling and administrative | $ | 5 |
| Fixed costs per year: | ||
| Fixed manufacturing overhead | $ | 774,000 |
| Fixed selling and administrative expense | $ | 346,000 |
The company sold 28,000 units in the East region and 10,000 units in the West region. It determined that $170,000 of its fixed selling and administrative expense is traceable to the West region, $120,000 is traceable to the East region, and the remaining $56,000 is a common fixed expense. The company will continue to incur the total amount of its fixed
Required:
1. What is the unit product cost under variable costing?
2. What is the unit product cost under absorption costing?
3. What is the company’s total contribution margin under variable costing?
4. What is the company’s net operating income (loss) under variable costing?
5. What is the company’s total gross margin under absorption costing?
6. What is the company’s net operating income (loss) under absorption costing?
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 3 images
