Question

. Steve's Burgers makes burger patties for large supermarket chains. The burgers are frozen and can last in storage for months. Cost information on the burgers is as follows: Meat used for burgers $220,000 Wages used to make burgers 100,000 Overhead of the factory – variable 50,000 – fixed 70,000 Office staff 60,000 Sales staff 120,000 Bob's salary 50,000 Steve made 400,000 burgers this past year but only sold 375,000 to his customers. He sells them for $1.60 per burger patty. Steve tells you that the office and sales staff are variable costs while his salary is fixed. Instructions a) Calculate Steve's income assuming he uses variable costing. b) Calculate Steve's income assuming he uses absorption costing. Round the unit costs to cents (0.5 rounds to the next number)

Answer 1

solution:- Cuculation of Unit cost!- Variable Absorption $ 220,000 $ 210,000 Meat $100,000 $100,000 wages 50,000 50,000 vouable overhead 70,000 Fixed overhead $ 370,000 $440,000 Amount produced 300,000 6400,000 No. of burgersduced $1,1 $0.925 Unit cost Tag Absorption costing Income Statement- = $ 600,000 sales (375.000 x $1.60) lews:- cost of scules ( 374000 x $101) 412,500 = $18.7,500 Gross profit lest: Vooriable costs 1 + Office Staff y sales staff 160,000) (120,000) Bobes es salary (50,000) less: fixed administration - Net Income flous) ($ 42,500)

(b) Variable costing Income statement !- $ 600,000 selles ($375,000 x $1.60) leso; cost of goods sold (315000 x $0.923) ($346,879 180,000) variable selling and administratie exp. [ $60,000 + $120,000 Contribution margin $73,125 leysi pixed costs; Factory - Bob's salcory 70,000) (90,000) ($ 46,875) Net Income Closs) =