Aspen Manufacturing Company sells its products for $33 each. The current production level is 50,000 units, although only 40,000 units are anticipated to be sold. Unit manufacturing costs are: Direct materials $5.00 per unit produced Direct manufacturing labor $11.00 per unit produced Variable manufacturing costs $6.00 per unit produced Total fixed manufacturing costs $180,000 Marketing expenses $3.00 per unit sold, plus $100,000 per year
Required:
a. What is income under variable costing â show computations?
b. Is income greater than or less than if using absorption costing and by what dollar amount â show computations?
Aspen Manufacturing Company sells its products for $33 each. The current production level is 50,000 units, although only 40,000 units are anticipated to be sold. Unit manufacturing costs are: Direct materials $5.00 per unit produced Direct manufacturing labor $11.00 per unit produced Variable manufacturing costs $6.00 per unit produced Total fixed manufacturing costs $180,000 Marketing expenses $3.00 per unit sold, plus $100,000 per year
Required:
a. What is income under variable costing â show computations?
b. Is income greater than or less than if using absorption costing and by what dollar amount â show computations?
Related questions
The Dorset Corporation produces and sells a single product. The following data refer to the year just completed:
| Beginning inventory | 0 | |
| Units produced | 34,000 | |
| Units sold | 25,900 | |
| Selling price per unit | $ | 482 |
| Selling and administrative expenses: | ||
| Variable per unit | $ | 16 |
| Fixed per year | $ | 362,600 |
| Manufacturing costs: | ||
| Direct materials cost per unit | $ | 240 |
| Direct labor cost per unit | $ | 56 |
| Variable manufacturing overhead cost per unit | $ | 34 |
| Fixed manufacturing overhead per year | $ | 578,000 |
Assume that direct labor is a variable cost.
Required:
a. Compute the unit product cost under both the absorption costing and variable costing approaches.
b. Prepare an income statement for the year using absorption costing.
c. Prepare an income statement for the year using variable costing.
d. Reconcile the absorption costing and variable costing net operating income figures in (b) and (c) above.
Walsh Company manufactures and sells one product. The following information pertains to each of the companyâs first two years of operations:
| Variable costs per unit: | ||
| Manufacturing: | ||
| Direct materials | $ | 26 |
| Direct labor | $ | 16 |
| Variable manufacturing overhead | $ | 6 |
| Variable selling and administrative | $ | 5 |
| Fixed costs per year: | ||
| Fixed manufacturing overhead | $ | 320,000 |
| Fixed selling and administrative expenses | $ | 50,000 |
During its first year of operations, Walsh produced 50,000 units and sold 40,000 units. During its second year of operations, it produced 40,000 units and sold 50,000 units. The selling price of the companyâs product is $57 per unit.
Required:
1. Assume the company uses variable costing:
a. Compute the unit product cost for Year 1 and Year 2.
b. Prepare an income statement for Year 1 and Year 2.
2. Assume the company uses absorption costing:
a. Compute the unit product cost for Year 1 and Year 2.
b. Prepare an income statement for Year 1 and Year 2.
3. Reconcile the difference between variable costing and absorption costing net operating income in Year 1.
