(Direct and absorption costing) The information that follows pertains to Consumer Products for the year ended December 31, 19X6

6. Direct and absorption costing

The information that follows pertains to Consumer Products for the year ended December 31, 19X6.
Inventory, 1/1/X6 24,000 units
Units manufactured 80,000
Units sold 82,000
Inventory, 12/31/X6 ? units
Manufacturing costs:
Direct materials $3 per unit
Direct labor $5 per unit
Variable factory overhead $9 per unit
Fixed factory overhead $280,000
Selling & administrative expenses:
Variable $2 per unit
Fixed $136,000

The unit selling price is $26. Assume that costs have been stable in recent years.

Instructions:
a. Compute the number of units in the ending inventory.
b. Calculate the cost of a unit assuming use of:
1. Direct costing.
2. Absorption costing.
c. Prepare an income statement for the year ended December 31, 19X6, by using direct costing.
d. Prepare an income statement for the year ended December 31, 19X6, by using absorption costing.

Click here for the solution: (Direct and absorption costing) The information that follows pertains to Consumer Products for the year ended December 31, 19X6

Duif Company's absorption costing income statement for the last year of operations is presented below

Duif Company's absorption costing income statement for the last year of operations is presented below:

Sales.........................................................$70,000
Less cost of goods sold:
Beginning inventory.............................................. 0
Add cost of goods manufactured..................48,000
Goods available for sale...............................48,000
Less ending inventory....................................6,000
Cost of goods sold......................................42,000
Gross margin..............................................28,000
Less selling & admin. expenses....................25,000
Net operating income................................$ 3,000

Data on units produced and sold for the year are given below:
Units in beginning inventory...................................0
Units produced..............................................8,000
Units sold......................................................7,000

Fixed factory overhead totaled $16,000 for the year. This overhead was applied to products at a rate of $2 per unit. Variable selling and administrative expenses were $3 per unit sold.

Required: Prepare a new income statement for the year using variable costing. Comment on the differences between the absorption costing and the variable costing income statements.

Click here for the solution: Duif Company's absorption costing income statement for the last year of operations is presented below

ACC 561 Question 13-45 Variable and Absorption Costing (Chan Manufacturing Company)

ACC 561 Question 13-45, Variable and Absorption Costing, on p. 621

Chan Manufacturing Company data for 20X7 follow: Sales: 12,000 units at $17 each Actual production 15,000 units Expected volume of production 18,000 units Manufacturing costs incurred Variable $120,000 Fixed 63,000 Nonmanufacturing costs incurred Variable $ 24,000 Fixed 18,000

1. Determine operating income for 20X7, assuming the firm uses the variable-costing approach to product costing. (Do not prepare a statement.)

2. Assume that there is no January 1, 20X7, inventory; no variances are allocated to inventory; and the firm uses a “full absorption” approach to product costing. Compute (a) the cost assigned to December 31, 20X7, inventory; and (b) operating income for the year ended December 31, 20X7. (Do not prepare a statement.)

Click here for the solution: ACC 561 Question 13-45 Variable and Absorption Costing (Chan Manufacturing Company)

ACC 561 Question 13-B3 (Comparison of Variable Costing and Absorption Costing) Youngstown Manufacturing

ACC 561 Question 13-B3, Comparison of Variable Costing and Absorption Costing, on p. 617

Consider the following information pertaining to a year’s operations of Youngstown Manufacturing:

Units sold 1,400
Units produced 1,600
Direct labor $4,200
Direct materials used 3,500
Fixed manufacturing overhead 2,200
Variable manufacturing overhead 300
Selling and administrative expenses (all fixed) 700
Beginning inventories 0
Contribution margin 5,600
Direct-material inventory, end 800
There are no work-in-process inventories.
1. What is the ending finished-goods inventory cost under absorption costing?
2. What is the ending finished-goods inventory cost under variable costing?

Click here for the solution: ACC 561 Question 13-B3, Comparison of Variable Costing and Absorption Costing Youngstown Manufacturing