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Pattison Products, Inc., began operations in October and manufactured 40,000 units during the month with the following unit costs: *Fixed overhead per unit = $280,000/40,000 units produced = $7. Total fixed factory overhead is $280,000 per month. During October, 38,400 units were sold at a price of $24, and fixed marketing and administrative expenses were $130,500. Required: 1. Calculate the cost of each unit using absorption costing. 2. How many units remain in ending inventory? What is the cost of ending inventory using absorption costing? 3. Prepare an absorption-costing income statement for Pattison Products, Inc., for the month of October. 4. What if November production was 40,000 units, costs were stable, and sales were 41,000 units? What is the cost of ending inventory? What is operating income for November?

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Cornerstones of Cost Management (C...

4th Edition
Don R. Hansen + 1 other
Publisher: Cengage Learning
ISBN: 9781305970663

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Chapter
Section
BuyFindarrow_forward

Cornerstones of Cost Management (C...

4th Edition
Don R. Hansen + 1 other
Publisher: Cengage Learning
ISBN: 9781305970663
Chapter 18, Problem 3CE
Textbook Problem
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Pattison Products, Inc., began operations in October and manufactured 40,000 units during the month with the following unit costs:

Chapter 18, Problem 3CE, Pattison Products, Inc., began operations in October and manufactured 40,000 units during the month

*Fixed overhead per unit = $280,000/40,000 units produced = $7.

Total fixed factory overhead is $280,000 per month. During October, 38,400 units were sold at a price of $24, and fixed marketing and administrative expenses were $130,500.

Required:

  1. 1. Calculate the cost of each unit using absorption costing.
  2. 2. How many units remain in ending inventory? What is the cost of ending inventory using absorption costing?
  3. 3. Prepare an absorption-costing income statement for Pattison Products, Inc., for the month of October.
  4. 4. What if November production was 40,000 units, costs were stable, and sales were 41,000 units? What is the cost of ending inventory? What is operating income for November?

1.

To determine

Compute the unit cost under absorption costing.

Explanation of Solution

Absorption Costing: Absorption costing is a method for calculating the full cost or total cost of a single product in production process. It includes the total cost assigned to products.

Compute the unit cost under absorption costing:

ParticularsPer Unit
Direct materials$5...

2.

To determine

Determine the number of units remain in ending inventory, and its cost using absorption costing.

3.

To determine

Prepare an income statement for PP Incorporation for the month of October under absorption costing method.

4.

To determine

Determine the cost of ending inventory and the operating income for the month of November, if November production and sales were 40,000 units and 41,000 respectively.

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Chapter 18 Solutions

Cornerstones of Cost Management (Cornerstones Series)
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