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EXERCISE 6-15 Absorption Costing Unit Product Cost and Income Statement [L06-1, L06-2] Refer to the data in Exercise 6-14 for Chuck Wagon Grills. Assume in this exercise that the com- pany uses absorption costing. Required: 1. Compute the unit product cost for one barbecue grill. 2. Prepare an income statement.

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Irving Heathcote
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10 Feb 2018

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Related questions

Chuck Wagon Grills, Inc., makes a single product—a handmade specialty barbecue grill that it sells for $200. Data for last year’s operations follow:

Units in beginning inventory 0
Units produced 10,000
Units sold 8,800
Units in ending inventory 1,200
Variable costs per unit:
Direct materials $ 60
Direct labor 40
Variable manufacturing overhead 10
Variable selling and administrative 30
Total variable cost per unit $ 140
Fixed costs:
Fixed manufacturing overhead $ 180,000
Fixed selling and administrative 330,000
Total fixed costs $ 510,000

Required:

1. Assume that the company uses variable costing. Compute the unit product cost for one barbecue grill.

Unit product cost____________

2. Assume that the company uses variable costing. Prepare a contribution format income statement for the year.

Chuck Wagon Grills, Inc.
Variable Costing Income Statement
Variable expenses:
0
0
Fixed expenses:
0

Chuck Wagon Grills, Inc., makes a single product—a handmadespecialty barbecue grill that it sells for $215. Data for lastyear’s operations follow:

Units in beginninginventory 0
Units produced 9,900
Units sold 9,200
Units in endinginventory 700
Variable costs perunit:
Direct materials $ 62
Direct labor 37
Variable manufacturingoverhead 13
Variable selling andadministrative 20
Total variable cost perunit $ 132
Fixed costs:
Fixed manufacturingoverhead $ 306,900
Fixed selling andadministrative 500,000
Total fixed costs $ 806,900

Required:
1.

Assume that the company uses absorption costing. Compute theunit product cost for one barbecue grill.

2.

Assume that the company uses absorption costing. Prepare anincome statement.

EXERCISE 6-6 Variable and Absorption Costing Unit Product Costs and Income Statements [L06-1, L06-2] Lynch Company manufactures and sells a single product. The following costs were incurred during the company's first year of operations: Variable costs per unit: Manufacturing: Direct materials ............. Direct labor .............................. Variable manufacturing overhead .... Variable selling and administrative .......... Fixed costs per year: Fixed manufacturing overhead .......... Fixed selling and administrative ............. $300,000 $190,000 During the year, the company produced 25,000 units and sold 20,000 units. The selling price of the company's product is $50 per unit. Required: 1. Assume that the company uses absorption costing: a. Compute the unit product cost. b. Prepare an income statement for the year. 2. Assume that the company uses variable costing: a. Compute the unit product cost. b. Prepare an income statement for the year.

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