Question

Requirements - X 1. Compute the product cost per unit produced under absorption costing and under variable costing. 2. Prepare income statements for January 2020 using: a. absorption costing. b. variable costing. 3. Is operating income higher under absorption costing or variable costing in January? What causes the difference? Print Done

Answer 1

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Piedmont Computer
Answer 1
Data Given
No. of units produced	1,000.00	Per Unit
Sales		750.00
Variable manufacturing cost per unit		450.00
Sales commission per unit		25.00
Fixed manufacturing Overhead	93,600.00	93.60	Fixed manufacturing Overhead/ Units Produced
Fixed selling and admin costs	62,400.00
Goggles produced	1,000.00
Goggles sold	945.00
Product cost per unit	Absorption Costing Income Statement	Variable Costing
Variable manufacturing cost per unit	450.00	450.00
Fixed manufacturing Overhead	93.60	-
Product cost per unit	543.60	450.00
Answer 2 a
Absorption Costing Income Statement
No. of units produced	1,000.00
No. of units sold	945.00
Closing Stock	55.00
Sales	708,750.00	Per unit price multiplied by number of units sold
Cost of Goods sold
Variable manufacturing cost per unit	425,250.00	Per unit cost multiplied by number of units sold
Fixed manufacturing Overhead	88,452.00	Per unit cost multiplied by number of units sold
Cost of Goods sold	513,702.00
Gross Profit	195,048.00
Operating Expense
Sales commission per unit	23,625.00	Per unit cost multiplied by number of units sold
Fixed selling and admin costs	62,400.00
Operating Expense	86,025.00
Income from Operations	109,023.00
Value of Closing Stock	29,898.00	Closing stocks unit*per unit cost of(Variable manufacturing cost+ Fixed manufacturing Overhead)
Answer 2 b
Variable Costing Income Statement
No. of units produced	1,000.00
No. of units sold	945.00
Closing Stock	55.00
Sales	708,750.00	Per unit price multiplied by number of units sold
Variable Cost of Goods sold
Variable manufacturing cost per unit	425,250.00	Per unit cost multiplied by number of units sold
Sales commission per unit	23,625.00	Per unit cost multiplied by number of units sold
Contribution	259,875.00
Fixed manufacturing Overhead	93,600.00	Per unit cost multiplied by number of units sold
Fixed selling and admin costs	62,400.00	Per unit cost multiplied by number of units sold
Income from Operations	103,875.00
Answer 2
Income form operations under absorption costing is higher and it is caused by the allocation of $ 5,148 fixed manufacturing overhead to closing Inventory while in contribution statement total fixed cost is deducted and nothing is allocated to closing stock.
No. of units produced	1,000.00
No. of units sold	945.00
Closing Stock	55.00
Fixed manufacturing Overhead per unit	93.60
Fixed manufacturing Overhead in closing stock	5,148.00