AP5-17 Variable and Full Costing Income: Comprehensive Problem [LO 1,2,3] The fo
ID: 2346917 • Letter: A
Question
AP5-17
Variable and Full Costing Income: Comprehensive Problem [LO 1,2,3]
The following information relates to Jorgensen Manufacturing Products for calendar year 2011, the company's first year of operation:
Units produced 8,060
Units sold 7,280
Selling price per unit $4,760
Direct material per unit $2,010
Direct labor per unit $1,250
Variable manufacturing overhead per unit $940
Variable selling cost per unit $232
Annual fixed manufacturing overhead $814,060
Annual fixed selling and administrative expense $401,200
Prepare an income statement using full costing. (List multiple entries from largest to smallest amounts, e.g. 10, 5, 2. Enter all amounts as positive amounts and subtract where necessary.)
Jorgensen Manufacturing
Income Statement
For the Year End December 31, 2011
Cost of goods soldFixed selling and administrative expensesVariable selling expenseSales $
Less SalesVariable selling expenseFixed selling and administrative expensesCost of goods sold
Gross margin
Less:
Cost of goods soldFixed selling and administrative expensesVariable selling expenseSales
Cost of goods soldFixed selling and administrative expensesSalesVariable selling expense
Net income $ _________________
Prepare an income statement using variable costing. (List multiple entries from largest to smallest amounts, e.g. 10, 5, 2. Enter all amounts as positive amounts and subtract where necessary.)
Jorgensen Manufacturing
Income Statement
For the Year End December 31, 2011
Selling costsSalesVariable expensesProduction costsFixed expensesManufacturing overheadSelling and administrative $
Less: SalesManufacturing overheadSelling and administrativeProduction costsVariable expensesSelling costsFixed expenses
Fixed expensesSelling and administrativeSalesVariable expensesSelling costsManufacturing overheadProduction costs
SalesVariable expensesManufacturing overheadProduction costsFixed expensesSelling costsSelling and administrative
Contribution margin
Less: Selling costsSalesVariable expensesManufacturing overheadProduction costsSelling and administrativeFixed expenses
Variable expensesSelling costsFixed expensesSelling and administrativeManufacturing overheadProduction costsSales
Variable expensesProduction costsSelling and administrativeSelling costsSalesFixed expensesManufacturing overhead
Net income $ __________________
Calculate the amount of fixed manufacturing overhead that will be included in ending inventory under full costing.
$ __________________
What is the difference between income computed under variable costing and income computed under full costing?
$ ___________________
Suppose that the company sold 8,060 units during the year. What would the variable costing net income have been?
$ ______________________
What would the full costing net income have been?
$ ________________________
Explanation / Answer
Jorgensen Manufacturing Company
Income statement
For the year end december31, 2011
Particulars
$
$
Net income
1,251,360
Income statement
For the year end december31, 2011
Particulars
$
$
Net income
1,172,580
Type of cost Absorption costing Variable costing Direct material per unit 2,010 2,010 Direct labor per unit 1,250 1,250 Variable manufacturing overhead 940 940 Fixed manufacturing overhead ($814,060 / 8,060) 101 0 Manufacturing cost per unit 4,301 4,200