Question 1 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. Variable costing. ii. 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.)
Question 1 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. Variable costing. ii. 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.)
Accounting
27th Edition
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Chapter21: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 21.28EX: Appendix Absorption costing income statement On June 30, the end of the first month of operations,...
Related questions
Question
Transcribed Image Text:Question 1
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.
Variable costing.
ii.
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.)
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 5 steps
Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Managerial Accounting: The Cornerstone of Busines…
Accounting
ISBN:
9781337115773
Author:
Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:
Cengage Learning
Accounting (Text Only)
Accounting
ISBN:
9781285743615
Author:
Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:
Cengage Learning
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Managerial Accounting: The Cornerstone of Busines…
Accounting
ISBN:
9781337115773
Author:
Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:
Cengage Learning
Accounting (Text Only)
Accounting
ISBN:
9781285743615
Author:
Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:
Cengage Learning
Essentials of Business Analytics (MindTap Course …
Statistics
ISBN:
9781305627734
Author:
Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:
Cengage Learning
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
Financial And Managerial Accounting
Accounting
ISBN:
9781337902663
Author:
WARREN, Carl S.
Publisher:
Cengage Learning,