Figure 8-2. Loring Company had the following data for the month: Variable costs per unit: Direct...
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Figure 8-2.
Fixed overhead is $4,000 per month; it is applied to production based on normal activity of 2,000 units. During the month, 2,000 units were produced. Loring started the month with 300 units in beginning inventory, with unit product cost equal to this month's unit product cost. A total of 2,100 units were sold during the month at price of $14. Selling and administrative expense for the month, all fixed, totaled $3,600. |
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8. Refer to Figure 8-2. What is the unit product cost under absorption costing?
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9. Refer to Figure 8-2. What is operating income under variable costing?
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10. Refer to Figure 8-2. What is the unit product cost under variable costing?
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Homework Answers
Answer to Question 8:
Unit Product Cost = Direct Materials + Direct Labor + Variable
Overhead + Fixed Overhead
Unit Product Cost = $4.00 + $3.20 + $1.00 + $4,000/2,000
Unit Product Cost = $8.20 + $2.00
Unit Product Cost = $10.20
Answer to Question 9:
Number of units sold = 2,100
Selling Price per unit = $14.00
Unit Product Cost = $8.20
Fixed Overhead = $4,000
Variable Selling Expenses = $0.40
Fixed Selling and Administrative Cost = $3,600
Selling and Administrative Cost = Variable Selling Expenses *
Number of units sold + Fixed Selling and Administrative Cost
Selling and Administrative Cost = $0.40 * 2,100 + $3,600
Selling and Administrative Cost = $4,440
Net Operating Income = (Selling Price per unit - Unit Product
Cost) * Number of units sold - Fixed Overhead - Selling and
Administrative Cost
Net Operating Income = ($14.00 - $8.20) * 2,100 - $4,000 -
$4,440
Net Operating Income = $12,180 - $8,440
Net Operating Income = $3,740
Answer to Question 10:
Unit Product Cost = Direct Materials + Direct Labor + Variable
Overhead
Unit Product Cost = $4.00 + $3.20 + $1.00
Unit Product Cost = $8.20
Add Answer to:
Figure 8-2.
Loring Company had the following data for the month:
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