Homework Answers
| WORKING NOTES : 1 | May | June | |
| beginning Inventory | 60 | 260 | |
| Unit Produced = | 700 | 560 | |
| Unit Sold = | 500 | 700 | |
| Closing Stock | 260 | 120 | |
| Selling Price Per unit | $ 100.00 | $ 100.00 | |
| Sales Value | $ 50,000 | $ 70,000 | |
| WORKING NOTES : 2 | May | June | |
| Fixed Overhead recovery Rate = | |||
| Fixed Manufacturing expenses | $ 14,000 | $ 14,000 | |
| Divide by | "/" By | "/" By | |
| Number of units Produced | $ 700 | $ 560 | |
| Fixed Overhead recovery Rate = | $ 20.00 | $ 25.00 | |
| WORKING NOTES : 3 | |||
| Calculation of cost of production Per units units as per absorption Costing | |||
| Particulars | Absorption Costing Amount - May | Absorption Costing Amount - June | |
| Variable Manufacturing ($ 17,500/700) | $ 25.00 | $ 25.00 | |
| Fixed Manufacturing Overhead | $ 20.00 | $ 25.00 | |
| Cost of Production per unit | $ 45.00 | $ 50.00 | |
| WORKING NOTES : 4 | |||
| Calculation of cost of production Per units units as per Variable Costing | |||
| Particulars | Variable Costing | ||
| Variable Manufacturing ($ 17,500/700) | $ 25.00 | ||
| Cost of Production per unit | $ 25.00 | ||
| SOLUTION = 1 | |||
| ABOSRPTION COSTING INCOME STATEMENTS | Absorption Costing | Absorption Costing | |
| Particulars | For May | For June | |
| Sales | $ 50,000 | $ 70,000 | |
| Cost of Goods Sold | |||
| Beginning inventory (60 Units X $ 45) | $ 2,700 | $ 11,700 | |
| Cost of Goods Manufactured (700 Units X $ 45) (560 Units X $ 50) | $ 31,500 | $ 28,000 | |
| Less: Ending Inventory (260 Units X $ 45) (120 Units X $ 50) | $ 11,700 | $ 6,000 | |
| Cost of Goods Sold | $ 22,500 | $ 33,700 | |
| Gross Profit | $ 27,500 | $ 36,300 | |
| Less : Selling Expenses | |||
| Fixed Operating | $ 7,000 | $ 7,000 | |
| Variable Operating | $ 10,000 | $ 12,000 | |
| Net Income | $ 10,500 | $ 17,300 | |
| SOLUTION = 2 | |||
| VARIABLE COSTING INCOME STATEMENTS | Variable Costing | Variable Costing | |
| Particulars | For May | For June | |
| Sales | $ 50,000 | $ 70,000 | |
| Cost of Goods Sold | |||
| Beginning inventory (60 Units X $ 25) | $ 1,500 | $ 6,500 | |
| Cost of Goods Manufactured (700 Units X $ 25) (560 Units X $ 25) | $ 17,500 | $ 14,000 | |
| Less: Ending Inventory (260 Units X $ 25) (120 Units X $ 25) | $ 6,500 | $ 3,000 | |
| Variable Operating | $ 10,000 | $ 12,000 | |
| Cost of Goods Sold | $ 22,500 | $ 29,500 | |
| Contribution | $ 27,500 | $ 40,500 | |
| Less: Fixed Manufacturing | $ 14,000 | $ 14,000 | |
| Less : Fixed Selling Operating | $ 7,000 | $ 7,000 | |
| Net Income | $ 6,500 | $ 19,500 | |
| SOLUTION = 3 | |||
| RECONCILIATION OF VARIABLE COSTING INCOME AND ABSOTPION COSTING INCOME | |||
| May | June | ||
| Variable costing net operating income (Loss) | $ 6,500 | $ 19,500 | |
| Add: Fixed manufacturing overhead deferred in closing inventory (260 Units X $ 20 Per unit) (120 X $ 25) | $ 5,200 | $ 3,000 | |
| Less : Fixed manufacturing overhead deferred in Opening inventory (60 Units X $ 20 Per unit) | $ 1,200 | $ 5,200 | |
| Absorption costing net operating income |
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