ACTG 2P12 Chapter Notes - Chapter 7: Total Absorption Costing, Expense, Lean Manufacturing

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13 Mar 2017

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Inventory costing methods: absorption costing, all manufacturing costs are charged to (absorbed by) the product, variable costing, only direct materials, direct labour, and variable manufacturing overhead costs are considered product costs. Product cost manufacturing overhead period cost. Fixed manufacturing overhead (,000 / 30,000 units produced) Cost of goods manufactured (30,000 units x ) Cost of goods sold (20,000 units x ) There is one primary difference between variable and absorption costing: under variable costing, the fixed manufacturing overhead is charged as an expense in the current period. Variable selling and administrative expenses (2000 units x ) In this case, there is no increase in ending inventory, so fixed overhead costs of the current period are not deferred to future periods through the ending inventory. Fix-it selling price: fix-it selling price: per unit. Units: produced 30,000; sold 20,000; beginning inventory 0. Variable unit costs: manufacturing (direct materials , direct labour , variable overhead )

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.

viridianworm389

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.

e following information applies to the questions displayed below.]

Diego Company manufactures one product that is sold for $72 per unit in two geographic regionsâthe East and West regions. The following information pertains to the companyâs first year of operations in which it produced 43,000 units and sold 38,000 units.


Variable costs per unit:
Manufacturing:
Direct materials	$	22
Direct labor	$	14
Variable manufacturing overhead	$	3
Variable selling and administrative	$	5
Fixed costs per year:
Fixed manufacturing overhead	$	774,000
Fixed selling and administrative expenses	$	346,000

The company sold 28,000 units in the East region and 10,000 units in the West region. It determined that $170,000 of its fixed selling and administrative expenses is traceable to the West region, $120,000 is traceable to the East region, and the remaining $56,000 is a common fixed cost. The company will continue to incur the total amount of its fixed manufacturing overhead costs as long as it continues to produce any amount of its only product.

Difference of Variable Costing and Absorption Costing Net Operating Incomes
Variable costing net operating income (loss)
Add: Fixed manufacturing overhead cost deferred in inventory under absorption costing
Absorption costing net operating income (loss)	$34,000

erinsea-lion623

ACTG 2P12 Chapter Notes - Chapter 7: Total Absorption Costing, Expense, Lean Manufacturing

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