Question

1) Consider the following cost and production informatio wing cost and production information for Barnard Steel Building Company, Inc, Part C-2472 Part D-1340 All other parts Quantity 1140 Subtotal Average Subtotal Average unit Subtotal Average unit Direct costs Material cout $ 150,000 $ 250 $ 405.000 $ 33755 2,446,440 2,146 Convenio cost 72,000 500 129.000 1075 974.700 855 Total direct costs $ 252,000 $ 1,750 $ 534000 $ 4,450 3,421,140 3,001 Indirect coute Indirect production cost 385,500 6,150 738,000 6,150 7011 000 6,150 Indirect operating cost 723,600 3,025 5025 Total direct costs $1.609.2005 11,175 $1,341.000 $ 11.175 $ 12,739,480 $ 11,175 Total costs 1.161.200 $ 12.925 $ 1,875,000 $ 15,625 $16.160.600 14176 603,000 3,025 S. O Additional information: - Sales revenue: $20,000,000. • Beginning inventory: $1,150,000. - Sales of part D-1340: 80 units. Sales of all other parts are the same as the number of units produced. Sales price of part D-1340: $35,500 per unit All indirect costs are fixed The only spending increase was for materials cost due to increased production. All other spending! as shown above was unchanged. Required: (a) Compute the (1) contribution margin, (2) operating income, and (3) ending inventory for Barnard Steel Building Company using the variable costing method. (b) Compute the (1) gross margin, (2) operating income, and (3) ending inventory for Barnard Steel Building Company using the absorption costing method.

Answer 1

Answer   1

Variable   portion per machine hour = (Overhead costs at highest level of machine hours   less Overhead costs at lowest level of machine hours)/(Highest level of   machine hours less Lowest level of machine hours)

Variable   portion per machine hour = ($ 115,322 less $ 101,793)/(1,618 less 1,292) = $   41.50

Total   Costs at 1292 machine hours = $ 101,793

Total   Costs = Fixed Costs add Variable Costs

$   101,793 = Fixed Costs add (1292 machine hours * $ 41.50 per machine hour)

Fixed   Costs = $ 48,175

Answer   2

Total   Costs at 1,700 machine hours = Fixed Costs add Variable Costs

Total   Costs at 1,700 machine hours = $ 48,175 add (1,700 machine hours * $ 41.50   per machine hour) = $ 118,725