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.
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.
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.
Bracey Company manufactures and sells one product. The following information pertains to the companyâs first year of operations:
| Variable cost per unit: | ||
| Direct materials | $ | 23 |
| Fixed costs per year: | ||
| Direct labor | $ | 275,000 |
| Fixed manufacturing overhead | $ | 338,800 |
| Fixed selling and administrative expenses | $ | 56,000 |
The company does not incur any variable manufacturing overhead costs or variable selling and administrative expenses. During its first year of operations, Bracey produced 22,000 units and sold 20,700 units. The selling price of the companyâs product is $56 per unit.
Required:
1. Assume the company uses super-variable costing:
a. Compute the unit product cost for the year.
b. Prepare an income statement for the year.
2. Assume the company uses a variable costing system that assigns $12.50 of direct labor cost to each unit produced:
a. Compute the unit product cost for the year.
b. Prepare an income statement for the year.
3. Assume the company uses an absorption costing system that assigns $12.50 of direct labor cost and $15.40 of fixed manufacturing overhead cost to each unit produced:
a. Compute the unit product cost for the year.
b. Prepare an income statement for the year.
4a. Reconcile the difference between the super-variable costing and variable costing net operating incomes.
4b. Reconcile the difference between the super-variable costing and absorption costing net operating incomes.
