Q.1 Karachi Company manufactures and sells a single product. The following costs were incurred during the company’s third year of operations: Variable costs per unit: Manufacturing: Direct materials . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Variable manufacturing overhead . . . . . . . . . . . . .. 6 Variable selling and administrative . . . . . . . . . . . . 8 Fixed costs per year: Fixed manufacturing overhead . . . . . . . . . . . . . . . . . 600,000 Fixed selling and administrative . . . . . . . . . . . . . . . . 380,000 During the year, the company produced 35,000 units and sold 30,000 units. Units in opening inventory were 5,000 which were produced on the same costs per unit. Fixed manufacturing per unit in the previous accounting period was also the same. The selling price of the company’s product is 130 per unit. Required: Assume that the company uses absorption costing: Compute the unit product cost. Prepare an income statement for the year. Assume that the company uses variable costing: Compute the unit product cost. Prepare an income statement for the year. 3. Prepare reconciliation statement to reconcile the profits
Q.1 Karachi Company manufactures and sells a single product. The following costs were incurred during the company’s third year of operations:
Variable costs per unit:
Manufacturing:
Direct materials . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Variable manufacturing
Variable selling and administrative . . . . . . . . . . . . 8
Fixed costs per year:
Fixed manufacturing overhead . . . . . . . . . . . . . . . . . 600,000
Fixed selling and administrative . . . . . . . . . . . . . . . . 380,000
During the year, the company produced 35,000 units and sold 30,000 units. Units in opening inventory were 5,000 which were produced on the same costs per unit. Fixed manufacturing per unit in the previous accounting period was also the same. The selling price of the company’s product is 130 per unit.
Required:
- Assume that the company uses absorption costing:
- Compute the unit product cost.
- Prepare an income statement for the year.
- Assume that the company uses variable costing:
- Compute the unit product cost.
- Prepare an income statement for the year.
3. Prepare
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