ACCT-3030 Study Guide - Final Guide: Earnings Before Interest And Taxes, Product Manager
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Your Company manufactures and sells one product. The sellingprice per unit is $80 per unit. The following pertains to thecompany's first year of operations in which it produced 40,000 andsold 35,000 units.
Variable costs: | |
Manufacturing: | |
Direct materials | 960,000 |
Direct labor | 560,000 |
Variable manufacturing overhead | 80,000 |
Variable selling | 140,000 |
Fixed Costs per year: | |
Fixed manufacturing | 840,000 |
Fixed selling and administrative | 490,000 |
Instructions: | |
1.Using the above information prepare | |
an income statement in the traditional | |
format. | |
2. Prepare an income statement in the | |
contribution format. | |
3. Compute the unit cost under absorption costing. | |
4. Compute the unit cost under variable costing. | |
5. Compute the contribution margin per unit. | |
6. Compute the contribution margin ratio | |
7. There is a difference in the net income using one | |
statement versus the other; explain the | |
cause of the difference? | |
| 8. Compute the breakeven sales in units 9. Compute the breakeven sales dollars. |
Denton Company manufactures and sells a single product. Cost data for the product are given:
| Variable costs per unit: | ||||
| Direct materials | $ | 3 | ||
| Direct labor | 10 | |||
| Variable manufacturing overhead | 3 | |||
| Variable selling and administrative | 1 | |||
| Total variable cost per unit | $ | 17 | ||
| Fixed costs per month: | ||||
| Fixed manufacturing overhead | $ | 63,000 | ||
| Fixed selling and administrative | 160,000 | |||
| Total fixed cost per month | $ | 223,000 | ||
The product sells for $46 per unit. Production and sales data for July and August, the first two months of operations, follow:
| Units Produced | Units Sold | |
| July | 21,000 | 17,000 |
| August | 21,000 | 25,000 |
The companyâs Accounting Department has prepared the following absorption costing income statements for July and August:
| July | August | ||||
| Sales | $ | 782,000 | $ | 1,150,000 | |
| Cost of goods sold | 323,000 | 475,000 | |||
| Gross margin | 459,000 | 675,000 | |||
| Selling and administrative expenses | 177,000 | 185,000 | |||
| Net operating income | $ | 282,000 | $ | 490,000 | |
Required:
1. Determine the unit product cost under:
a. Absorption costing.
b. Variable costing.
2. Prepare contribution format variable costing income statements for July and August.
3. Reconcile the variable costing and absorption costing net operating incomes.
| Denton Company manufactures andsells a single product. Cost data for the product are givenbelow: |
| Variable costs perunit: | ||
| Direct materials | $4 | |
| Direct labor | 12 | |
| Variable manufacturingoverhead | 4 | |
| Variable selling andadministrative | 1 | |
| Total variable costsper unit | $21 | |
| Fixed costs permonth: | ||
| Fixed manufacturingoverhead | $ | 108,000 |
| Fixed selling andadministrative | 175,000 | |
| Total fixed cost permonth | $ | 283,000 |
The product sells for $54 per unit. Production and sales datafor July and August, the first two months of operations, are asfollows: |
| Units Produced | Units Sold | |
| July | 27,000 | 23,000 |
| August | 27,000 | 31,000 |
The companyâs Accounting Department has prepared absorptioncosting income statements for |
| July | August | ||||
| Sales | $ | 1,242,000 | $ | 1,674,000 | |
| Cost of goodssold | 552,000 | 744,000 | |||
| Gross margin | 690,000 | 930,000 | |||
| Selling andadministrative expenses | 198,000 | 206,000 | |||
| Net operatingincome | $ | 492,000 | $ | 724,000 | |
|
2. Prepare contribution format variable costing incomestatements for July and August.
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