Sales (@ $25 per unit).... Cost of goods sold (@ $18 per unit). Gross margin..... $1,000,000 $1,250,000 720,000 900,000 280,000 350,000 Selling and administrative expenses" 210,000 Net operating income .. 230,000 S 70,000 $ 120,000 "S2 per unit variable; $130,000 fixed each year. page 294 The company's $18 unit product cost is computed as follows: Direct materials $ 4 Direct labor.. 7 Variable manufacturing overhead. 1 Fixed manufacturing overhead ($270,000 + 45,000 units). 6. Absorption costing unit product cost.... $18 Forty percent of fixed manufacturing overhead consists of wages and salaries; the remainder consists of depreciation charges on production equipment and buildings. Production and cost data for the first two years of operations are: Year 1 Year 2 Units produced. 45,000 45,000 Units sold... 40,000 50,000 Required: 1. Using variable costing, what is the unit product cost for both years? 2. What is the variable costing net operating income in Year 1 and in Year 2? 3. Reconcile the absorption costing and the variable costing net operating income figures for each vear.

Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter6: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 11E
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Sales (@ $25 per unit)....
Cost of goods sold (@ $18 per unit).
Gross margin.....
$1,000,000 $1,250,000
720,000
900,000
280,000
350,000
Selling and administrative expenses"
210,000
Net operating income ..
230,000
S 70,000 $ 120,000
"S2 per unit variable; $130,000 fixed each year.
page 294
The company's $18 unit product cost is computed as follows:
Direct materials
$ 4
Direct labor..
7
Variable manufacturing overhead.
1
Fixed manufacturing overhead ($270,000 + 45,000 units).
6.
Absorption costing unit product cost....
$18
Forty percent of fixed manufacturing overhead consists of wages and salaries; the remainder consists of depreciation charges on production equipment and
buildings.
Production and cost data for the first two years of operations are:
Year 1
Year 2
Units produced.
45,000 45,000
Units sold...
40,000 50,000
Required:
1. Using variable costing, what is the unit product cost for both years?
2. What is the variable costing net operating income in Year 1 and in Year 2?
3. Reconcile the absorption costing and the variable costing net operating income figures for each vear.
Transcribed Image Text:Sales (@ $25 per unit).... Cost of goods sold (@ $18 per unit). Gross margin..... $1,000,000 $1,250,000 720,000 900,000 280,000 350,000 Selling and administrative expenses" 210,000 Net operating income .. 230,000 S 70,000 $ 120,000 "S2 per unit variable; $130,000 fixed each year. page 294 The company's $18 unit product cost is computed as follows: Direct materials $ 4 Direct labor.. 7 Variable manufacturing overhead. 1 Fixed manufacturing overhead ($270,000 + 45,000 units). 6. Absorption costing unit product cost.... $18 Forty percent of fixed manufacturing overhead consists of wages and salaries; the remainder consists of depreciation charges on production equipment and buildings. Production and cost data for the first two years of operations are: Year 1 Year 2 Units produced. 45,000 45,000 Units sold... 40,000 50,000 Required: 1. Using variable costing, what is the unit product cost for both years? 2. What is the variable costing net operating income in Year 1 and in Year 2? 3. Reconcile the absorption costing and the variable costing net operating income figures for each vear.
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