Bonn Corporation produces and sells aunique type of TV recording device. The company has just opened anew plant to manufacture the device. The following cost and revenuedata have been provided for the first month of the plantâsoperation.
Beginninginventory 0
Unitsproduced 60,000
Unitssold 50,000
Selling price perunit $80
Selling and administrativeexpenses:
Variable perunit $4
Fixed $700,000
Manufacturing costs:
Direct materials cost perunit $20
Direct labor cost perunit $8
Variable manufacturing overhead costperunit $4
Fixed manufacturing overheadcost $800,000
Required:
Determine the unit product cost using absorption costing andvariable costing.
Prepare an income statement for the month using variablecosting.
Prepare an income statement for the month using absorptioncosting.
Explain why or why not the operating income is the same ifincome statements for absorption costing or variable costing areprepared.
Bonn Corporation produces and sells aunique type of TV recording device. The company has just opened anew plant to manufacture the device. The following cost and revenuedata have been provided for the first month of the plantâsoperation.
Beginninginventory 0
Unitsproduced 60,000
Unitssold 50,000
Selling price perunit $80
Selling and administrativeexpenses:
Variable perunit $4
Fixed $700,000
Manufacturing costs:
Direct materials cost perunit $20
Direct labor cost perunit $8
Variable manufacturing overhead costperunit $4
Fixed manufacturing overheadcost $800,000
Required:
Determine the unit product cost using absorption costing andvariable costing.
Prepare an income statement for the month using variablecosting.
Prepare an income statement for the month using absorptioncosting.
Explain why or why not the operating income is the same ifincome statements for absorption costing or variable costing areprepared.
Related questions
The Dorset Corporation produces and sells a single product. Thefollowing data refer to the year just completed:
| Beginning inventory | 0 | |
| Units produced | 29,500 | |
| Units sold | 20,400 | |
| Selling price per unit | $ | 469 |
| Selling and administrativeexpenses: | ||
| Variable per unit | $ | 19 |
| Fixed per year | $ | 346,800 |
| Manufacturing costs: | ||
| Direct materials cost perunit | $ | 203 |
| Direct labor cost per unit | $ | 50 |
| Variable manufacturing overheadcost per unit | $ | 30 |
| Fixed manufacturing overhead peryear | $ | 442,500 |
Assume that direct labor is a variable cost.
Required:
a. Compute the unit product cost under both the absorptioncosting and variable costing approaches.
b. Prepare an income statement for the year using absorptioncosting.
c. Prepare an income statement for the year using variablecosting.
d. Reconcile the absorption costing and variable costing netoperating income figures in (b) and (c) above.
Maga Company, which has only one product, has provided thefollowing data concerning its most recent month of operations: |
| Selling price | $ | 167 |
| Units in beginninginventory | 0 | |
| Units produced | 3,410 | |
| Units sold | 3,180 | |
| Units in endinginventory | 230 | |
| Variable costs perunit: | ||
| Directmaterials | $ | 48 |
| Direct labor | $ | 55 |
| Variablemanufacturing overhead | $ | 13 |
| Variable selling andadministrative | $ | 12 |
| Fixed costs: | ||
| Fixed manufacturingoverhead | $ | 102,300 |
| Fixed selling andadministrative | $ | 12,720 |
| Required: |
| a. | What is the unit product cost for the month under variablecosting? (Do not round intermediate calculations. Omit the"$" sign in your response.) |
| Cost perunit | |
| Variablecosting | $ |
| b. | What is the unit product cost for the month under absorptioncosting? (Omit the "$" sign in your response.) |
| Cost perunit | |
| Absorptioncosting | $ |
| c. | Prepare a contribution format income statement for the monthusing variable costing. (Input all amounts as positivevalues except losses which should be indicated by a minus sign.Omit the "$" sign in your response.) |
| Variable Costing Income Statement | ||
| (Click toselect)SalesVariable cost of goods soldManufacturingoverheadVariable selling and administrative expensesContributionmarginNet operating income (loss)Selling and administrativeexpenses | $ | |
| Variableexpenses: | ||
| (Click to select)DirectlaborSalesVariable selling and administrative expensesVariable costof goods soldNet operating incomeContribution marginDirectmaterials | $ | |
| (Click to select)Variableselling and administrative expensesContribution marginSalesDirectmaterialsVariable cost of goods soldDirect laborNet operatingincome | ||
| (Click toselect)SalesNet operating income (loss)ManufacturingoverheadVariable selling and administrative expensesSelling andadministrative expensesContribution marginVariable cost of goodssold | ||
| Fixed expenses: | ||
| (Click toselect)SalesFixed manufacturing overheadVariable cost of goodssoldVariable selling and administrative expensesNet operatingincomeContribution marginFixed selling and administrativeexpenses | ||
| (Click to select)Netoperating incomeSalesVariable cost of goods soldContributionmarginVariable selling and administrative expensesFixed selling andadministrative expensesFixed manufacturing overhead | ||
| (Click to select)Netoperating income (loss)Selling and administrativeexpensesContribution marginVariable cost of goods soldVariableselling and administrative expensesSalesManufacturing overhead | $ | |
| d. | Prepare an income statement for the month using absorptioncosting. (Input all amounts as positive values exceptlosses which should be indicated by a minus sign. Omit the "$" signin your response.) |
| Absorption Costing Income Statement | |||
| (Click toselect)Variable selling and administrative expensesCost of goodssoldNet operating income (loss)Fixed selling and administrativeexpensesGross marginSales | $ | ||
| (Click to select)Netoperating income (loss)Cost of goods soldGross marginVariableselling and administrative expensesFixed selling and administrativeexpensesSales | |||
| (Click toselect)Cost of goods soldVariable selling and administrativeexpensesNet operating income (loss)Fixed selling and administrativeexpensesSalesGross margin | |||
| Selling andadministrative expenses: | |||
| (Click toselect)Cost of goods soldSalesVariable selling and administrativeexpensesNet operating income (loss)Fixed selling and administrativeexpensesGross margin | $ | ||
| (Click toselect)Gross marginSalesFixed selling and administrativeexpensesVariable selling and administrative expensesCost of goodssoldNet operating income (loss) | |||
| (Click toselect)Fixed selling and administrative expensesCost of goodssoldNet operating income (loss)Variable selling and administrativeexpensesSalesGross margin | $ | ||
| e. | Reconcile the variable costing and absorption costing netoperating incomes for the month. (Omit the "$" sign in yourresponse.) |
| Reconciliation of Variable Costing and Absorption Costing NetOperating Incomes | |
| Variable costing netoperating income | $ |
| (Click toselect)DeductAdd: (Click to select)Fixed manufacturing overheadcosts deferred in inventory under absorption costingFixedmanufacturing overhead costs released from inventory underabsorption costing | |
| Absorption costingnet operating income | $ |
Mahugh Corporation, which has only one product, has provided thefollowing data concerning its most recent month of operations:
| Selling price | 187 | |
| Units in beginninginventory | 0 | |
| Units produced | 3,660 | |
| Units sold | 3,100 | |
| Units in endinginventory | 560 | |
| Variable costs perunit: | ||
| Directmaterials | 50 | |
| Direct labor | 55 | |
| Variablemanufacturing overhead | 17 | |
| Variable selling andadministrative | 19 | |
| Fixed costs: | ||
| Fixed manufacturingoverhead | $ | 124,440 |
| Fixed selling andadministrative | $ | 9,300 |
Required:
a. What is the unit product cost for the monthunder variable costing? (Do not round intermediatecalculations.)
b. What is the unit product cost forthe month under absorption costing?
c. Prepare a contribution formatincome statement for the month using variable costing.
d. Prepare an income statement forthe month using absorption costing.
