Question

2 BIUDAYA 2 > Requirements Prepare income statements in good form for Tiger Mountain Gelato for May 2013 using absorption costing and variable costine Indeet the descriptions for any subtotals using the increase indent button Double underline operating income (Always cell references and formulas where appropriate to receive full credit. If you copy/paste from the instruction tab you will be marked wrong Enter all amounts as positive values. Do not use a minu Absorption Costing Variable Casting Reconcile the recebew ering income and finished Goodstoryblances between the two con methods was creces and formulas where appropriate to receive full credit. If you copy/paste from the instruction to you will be marked wrong Enteralmente as positive values. Do not useaminus Absorption Cang Vla Costing 16 cest point to correct INTRANSWERS E NTERANSWERS ENTERANSWERS Ready

Answer 1

Value given
Direct material cost per unit	$2.50
Direct labor cost per unit	$0.75
Variable manufacturing overhead cost per unit	$0.25
Fixed manufacturing overhead costs	$6,000.00
Total fixed selling and administrative costs	$5,000.00
Sales price per unit	$8.00
Pints of gelato produced	12,000.00
Pints of gelato sold	11,500.00
Requirement 1
Computation of product cost per unit
	Absorption Costing	Variable Costing
Direct Material costs	2.50	2.50
Direct Labor costs	0.75	0.75
Variable Manufacturing Overhead costs	0.25	0.25
Fixed Manufacturing Overhead costs	0.50	-	Refer Note 1
Product cost per unit	4.00	3.50
Note 1
Fixed Manufacturing CPU = Fixed Manufacturing Overhead/Units Produced
=6000/12000
=0.50
Requirement 2
Computation of balance in Finished Goods inventory on May 31,2018
Beginning inventory in units	-
Units produced	12,000
Units available for sale	12,000
Units sold	11,500
Ending inventory in units	500
	Absorption Costing	Variable Costing
Ending inventory in units	500	500
Product cost per unit	4	3.5
Balance in Finished Goods Inventory	2000	1750
Requirement 3
Statement of income
TIGER MOUNTAIN GELATO
Income Statement ( Absorption Costing)
Sales ( 11,500 units * $ 8)		$92,000
Less: Cost of goods sold
Opening Inventory	$0
Add: Cost of goods manufactured (12000* $ 4)	$48,000
Cost of goods available for Sale	$48,000
Less: Closing Inventory ( 500 * $ 4)	$2,000
Cost of Goods Sold		$46,000
Gross profit		$46,000
Less:Fixed Selling and Administrative costs		$5,000
Net Operating Income		$41,000
TIGER MOUNTAIN GELATO
Income Statement ( Variable Costing)
Sales ( 11,500 units * $ 8)		$92,000
Less: Cost of goods sold
Opening Inventory	$0
Add: Cost of goods manufactured (12000* $ 3.50)	$42,000
Cost of goods available for Sale	$42,000
Less: Closing Inventory ( 500 * $ 3.50)	$1,750
Cost of Goods Sold		$40,250
Gross profit		$51,750
Less:
Fixed Manufacturing costs		$6,000
Fixed Selling and Administrative costs		$5,000
Net Operating Income		$40,750
Requirement 4
Reconciliation of difference between operating income & Finished Goods Inventory
	Absorption Costing	Variable Costing	Difference
Operating Income	$41,000	$40,750	$250
Finished Goods Inventory	$2,000	$1,750	$250
Reconciliation of difference between operating income
Net operating income under variable costing		$40,750
Add- Fixed Manufacturing overheads deferred in Inventory ( 500 * $ 0.50)		$250
Net operating income under absorption costing		$41,000