Question

During the most recent year, Osterman Company had the following data: Units in beginning inventory Units produced 10,000 Units sold ($47 per unit) 9,300 Variable costs per unit: Direct materials Direct labor Variable overhead Fixed costs: Fixed overhead per unit produced Fixed selling and administrative $138,000 Required: 1. Calculate the cost of goods sold under absorption costing. 2. Prepare an income statement using absorption costing. Enter amounts as positive numbers. Osterman Company Income Statement under Absorption Costing For the Most Recent Year

Answer 1

1. Calculate the cost of goods sold under absorption costing. $223,200 2. Prepare an income statement using absorption costing. Osterman Company Income Statement under Absorption Costing For the Most Recent Year Sales Less: Cost of goods sold Gross margin Less: Selling and administrative expense Operating income $437,100 223,200 213,900 138,000 $75,900

$9.00 Explanation: Absorption Costing |(a) Unit product cost under absorption costing: Direct materials Direct labor Variable overhead Fixed overhead Absorption costing unit product cost 6.00 4.00 5.00 $24.00 (b) Sales = (9,300 units * $47 per unit) = $437,100 (c) Cost of goods sold: Units sold (a) Absorption costing unit product cost (b) Cost of goods sold (a * b) 9,300 $24.00 $223,200

1. Calculate the cost of goods sold under variable costing. $176,700 2. Prepare an income statement using variable costing. Osterman Company Income Statement under Variable Costing For the Most Recent Year Sales Less: Variable cost of goods sold Contribution margin Less fixed expenses: Fixed overhead $50,000 Fixed selling and administrative expenses 138,000 Operating income $437,100 176,700 260,400 188,000 $72,400

Explanation: Variable Costing (a) Unit product cost under variable costing: Direct materials Direct labor Variable overhead Variable costing unit product cost $9.00 6.00 4.00 $19.00 (b) Sales = (9,300 units * $47 per unit) = $437,100 (c) Cost of goods sold: Units sold (a) Variable costing unit product cost (b) Variable cost of goods sold (a + b) 9,300 $19.00 $176,700 (d) Fixed overhead = (10,000 units * $5 per unit) = $50,000