GEN COMBO MANAGERIAL ACCOUNTING FOR MANAGERS; CONNECT 1S ACCESS CARD
GEN COMBO MANAGERIAL ACCOUNTING FOR MANAGERS; CONNECT 1S ACCESS CARD
4th Edition
ISBN: 9781259911682
Author: Eric Noreen
Publisher: McGraw-Hill Education
Question
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Chapter 5, Problem 5.29C

1.

To determine

Introduction: Job costing is a technique of determine the cost of a manufacturing job rather than the process of the job. Manufacturing overhead is applied to product or job order is determined as predetermined overhead.

To compute: the unit product cost for the year, net operating income using absorption costing and reconciliation statement.

1.

Expert Solution
Check Mark

Answer to Problem 5.29C

Income statement is given below.

Explanation of Solution

  1. Unit product cost by using variable costing for year 1, 2 and 3
  2. Year 1:

    Unit product cost by using variable costing:

      ParticularPer unit cost $
      Direct material 32
      Direct labor20
      Variable manufacturing overhead 4
      Unit product cost by using variable costing 46

    Year 2:

    Unit product cost by using variable costing:

      ParticularPer unit cost $
      Direct material 32
      Direct labor20
      Variable manufacturing overhead 4
      Unit product cost by using variable costing 46

    Year 3:

    Unit product cost by using variable costing:

      ParticularPer unit cost $
      Direct material 32
      Direct labor20
      Variable manufacturing overhead 4
      Unit product cost by using variable costing 46
  3. Income statement using variable costing
  4. Year 1:

    Cost of goods sold:

      costofgoodssold=unitsold×unitproductcost=80,000units×$56=$4,480,000

Variable selling and administrative costs:

  variablesellingandadministrativecost=unitsold×variablecostpereunit=80,000units×$36=$240,000

    ParticularAmount $Amount $
    Sales 6,000,000
    Variable expense
    Variable cost of goods sold 4,480,000
    Variable selling and administrative costs240,000
    Total variable expense4,470,000
    Contribution margin1,280,000
    Fixed expense660,000
    Fixed manufacturing overhead120,000
    Fixed selling and administrative expense780,000
    Total fixed expense 500,000
    Net operating income

Year 2:

Cost of goods sold:

  costofgoodssold=unitsold×unitproductcost=90,000units×$56=$5,040,000

Variable selling and administrative costs:

  variablesellingandadministrativecost=unitsold×variablecostpereunit=90,000units×$3=$270,000

    ParticularAmount $Amount $
    Sales 6,750,000
    Variable expense
    Variable cost of goods sold 5,040,000
    Variable selling and administrative costs270,000
    Total variable expense5,310,000
    Contribution margin1,80,000
    Fixed expense
    Fixed manufacturing overhead660,000
    Fixed selling and administrative expense120,000
    Total fixed expense 780,000
    Net operating income 660,000

Year 3:

Cost of goods sold:

  costofgoodssold=unitsold×unitproductcost=75,000units×$56=$4,200,000

Variable selling and administrative costs:

  variablesellingandadministrativecost=unitsold×variablecostpereunit=75,000units×$3=$225,000

    ParticularAmount $Amount $
    Sales 5,625,000
    Variable expense
    Variable cost of goods sold 4,200,000
    Variable selling and administrative costs225,000
    Total variable expense4,425,000
    Contribution margin1,200,000
    Fixed expense
    Fixed manufacturing overhead660,000
    Fixed selling and administrative expense120,000
    Total fixed expense 780,000
    Net operating income 420,000

2.

To determine

Introduction: Job costing is a technique of determine the cost of a manufacturing job rather than the process of the job. Manufacturing overhead is applied to product or job order is determined as predetermined overhead.

To compute: the unit product cost for the year, net operating income using absorption costing and reconciliation statement.

2.

Expert Solution
Check Mark

Answer to Problem 5.29C

Income statement is given below.

Explanation of Solution

  1. The Unit product costing using LIFO method of inventory reporting for year1, 2, and 3 will be same as using FIFO method as the cost per unit of the inventory remain same for three years.
  2. The assumption of inventory flow is considered as irrelevant when the product cost per unit remain stable in all the three years. Hence the income statement is also considerd to be the same.

3.

To determine

Introduction: Job costing is a technique of determine the cost of a manufacturing job rather than the process of the job. Manufacturing overhead is applied to product or job order is determined as predetermined overhead.

To compute: the unit product cost for the year, net operating income using absorption costing and reconciliation statement.

3.

Expert Solution
Check Mark

Answer to Problem 5.29C

Income statement is given below.

Explanation of Solution

  1. Year 1:
  2. Fixed manufacturing overhead per unit

      fixedmanufacturingoverhead=(Totalfixedmanufacturingoverhead)numberofunitsprodduced=$660,000100,000units=$6.6

      ParticularPer unit costs $
      Direct materials32
      Direct lobar20
      Variable manufacturing 4
      Fixed manufacturing overhead6.6
      Unit product cost by using absorption costing 62.60

    Year 2:

    Fixed manufacturing overhead per unit

      fixedmanufacturingoverhead=(Totalfixedmanufacturingoverhead)numberofunitsprodduced=$660,00075,000units=$8.80

      ParticularPer unit costs $
      Direct materials32
      Direct lobar20
      Variable manufacturing 4
      Fixed manufacturing overhead8.80
      Unit product cost by using absorption costing 64.80

    Year 3:

    Fixed manufacturing overhead per unit

      fixedmanufacturingoverhead=(Totalfixedmanufacturingoverhead)numberofunitsprodduced=$660,00080,000units=$8.25

      ParticularPer unit costs $
      Direct materials32
      Direct lobar20
      Variable manufacturing 4
      Fixed manufacturing overhead8.25
      Unit product cost by using absorption costing 64.25
  3. Income statement using absorption costing:
  4. Year 1:

      costofgoodssold=unitsold×unitproductcost=80,000units×$62.60=$5,008,000

      ParticularAmount
      Sales 6,000,000
      Cost of goods sold 5,008,000
      Contribution992,000
      Less: selling and administrative expense360,000
      Net operating income 632,000

    Year 2:

      costofgoodssold=unitsold×unitproductcost=(20,000units×$62.60)+(70,000×$64.80)=$5,778,000

      ParticularAmount
      Sales 6,750,000
      Cost of goods sold 5,788,000
      Contribution962,000
      Less: selling and administrative expense390,000
      Net operating income 572,000

    Year 3:

      costofgoodssold=unitsold×unitproductcost=(20,000units×$62.60)+(70,000×$64.25)=$4,821,500

      ParticularAmount
      Sales 5,625,000
      Cost of goods sold 4,821,500
      Contribution803,500
      Less: selling and administrative expense345,000
      Net operating income 458,500

4.

To determine

Introduction: Job costing is a technique of determine the cost of a manufacturing job rather than the process of the job. Manufacturing overhead is applied to product or job order is determined as predetermined overhead.

To compute: the unit product cost for the year, net operating income using absorption costing and reconciliation statement.

4.

Expert Solution
Check Mark

Answer to Problem 5.29C

Income statement is given below.

Explanation of Solution

  1. Company using absorption costing LIFO inventory assumption
  2. Year 1:

      fixedmanufacturingoverhead=(Totalfixedmanufacturingoverhead)numberofunitsprodduced=$660,000100,000units=$6.6

      ParticularPer unit cost
      Direct materials32
      Direct labor20
      Variable manufacturing overhead4
      Fixed manufacturing overhead6.6
      Unit product cost by using 62.60

    Year 2:

      fixedmanufacturingoverhead=(Totalfixedmanufacturingoverhead)numberofunitsprodduced=$660,00075,000units=$8.80

      ParticularPer unit cost
      Direct materials32
      Direct labor20
      Variable manufacturing overhead4
      Fixed manufacturing overhead6.6
      Unit product cost by using 64.80

    Year 3:

      fixedmanufacturingoverhead=(Totalfixedmanufacturingoverhead)numberofunitsprodduced=$660,00080,000units=$8.25

      ParticularPer unit cost
      Direct materials32
      Direct labor20
      Variable manufacturing overhead4
      Fixed manufacturing overhead6.6
      Unit product cost by using 64.25
  3. Income statement using absorption costing
  4. Year 1:

      costofgoodssold=unitsold×unitproductcost=(80,000units×$62.60)=$5,008,000

      ParticularAmount
      Sales 6,000,000
      Cost of goods sold 5,008,000
      Contribution992,000
      Less: selling and administrative expense360,000
      Net operating income 632,000

    Year 2:

      costofgoodssold=unitsold×unitproductcost=(75,000units×$64.80)+(15,000×$62.60)=$5,799,000

      ParticularAmount
      Sales 6,750,000
      Cost of goods sold 5,799,000
      Contribution962,000
      Less: selling and administrative expense390,000
      Net operating income 561,000

    Year 3:

      costofgoodssold=unitsold×unitproductcost=(75,000units×$64.25)=$4,818,750

      ParticularAmount
      Sales 5,625,000
      Cost of goods sold 4,818,000
      Contribution806,250
      Less: selling and administrative expense345,000
      Net operating income 461,250

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