Answered: The SIMple Company manufactures a…

Principles of Cost Accounting

17th Edition

ISBN:9781305087408

Author:Edward J. Vanderbeck, Maria R. Mitchell

Publisher:Edward J. Vanderbeck, Maria R. Mitchell

Chapter8: Standard Cost Accounting—materials, Labor, And Factory Overhead

Section: Chapter Questions

Problem 17P: Shinto Corp. uses a standard cost system and manufactures one product. The variable costs per...

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The SIMple Company manufactures a single product; the standard costs per unit being variable manufacturing $8, fixed manufacturing $6. Selling and administrative costs are $2 per unit sold. The selling price is $20 per unit. Actual and budgeted fixed overhead is $900,000 for the year. Information about the company’s production activity for the year is:

Units produced	150,000
Units sold	125,000
Units in opening inventory	5,000

Assuming all information is provided above, the difference in profit between absorption and variable costing would be expected to be:

Question 7 options:

1)	25,000 x $8

2)	30 000 x $8

3)	25 000 x $6

4)	30 000 x $6

Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

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