Question

Accounting 285 Team Exercise 3 (Koy) (Chapters 5-6) Chapter 5 Problem 1 Smores Co. produces and sells many camping products. The company has just opened a new plom to produce a cushy sleeping bag that will be marketed throughout the United States. The following cost and revenue data relate to May, the first month of the plant's operation O 47,000 42,000 $81 Beginning inventory Units produced Units sold Selling price per unit Selling and administrative expenses Variable per unit Fixed (total) Manufacturing costs: Direct materials cost per unit Direct labor cost per unit Variable manufacturing overhead cost per unit Fixed manufacturing overhead cost (total) $2 $561,000 $17 $4 $846,000 Management is anxious to see how profitable the new camp cot will be and has asked that an income statement be prepared for May. Assume that the company uses absorption costing. 1) What is the unit product cost? Dm 17 FMOH total units produced HDL + 8 $47 + imont + 4 unit prod846,000 $ 47,000 = 18 = + EmoH + 18 cost 2) Prepare an income statement for May. per unit sales - 47,000x81= 3,402,000 sales 2,368,000 - vm + 47,000 x 4=7-188,000 47x42,000= 1974,000 - FM - - 846,000 2,348,000 cross margin ki Vm = 42,000 2:- 94,000 FSTAS - 561,000 + DL 8x47,900 1,713,000 790,ooo 1x 447, doo - - 376, 000

Answer 1

The answer has been presented in the supporting sheet. For detailed answer refer to the supporting sheet.

Answer 2 Part 1) 3 Unit Product Cost (Under absorption Costing) 4 = Direct Material +Direct Labour +Variable Manufacturing Overheads + Fixed Manufacturing Cost per Unit 5 = 17 +8 +4 + ( 846000/47000) 6 = 17+8+4+18 7 = $47 9 Thus the correct answer is $ 47 10 11 Part 2) 12 Income Statement 13 For Month Ended May 14 Sales (81*42000) 15 Less Cost of goods sold (47*42000) 16 Gross Margin 17 Selling and adminstrative cost (5610 18 Net Income 19 3402000 1974000 1428000 645000 783000

Part 3) Unit Product Cost (Under Variable Costing) = Direct Material +Direct Labour +Variable Manufacturing Overheads = 17 +8 +4 = $ 29 - - Part 4) Income Statement For Month Ended May Sales (81*42000) Less Variable cost of goods sold (29 Less Variable selling and amdinstra Contribution Margin Less Fixed Cost Fixed Manufacturing Cost Fixed Selling and amdinstrative cos Net Income 3402000 1218000 84000 2100000 846000 561000 693000