Cost of Goods Manufactured, using Variable Costing and Absorption Costing On Dec
ID: 2400702 • Letter: C
Question
Cost of Goods Manufactured, using Variable Costing and Absorption Costing
On December 31, the end of the first year of operations, Frankenreiter Inc., manufactured 5,900 units and sold 5,100 units. The following income statement was prepared, based on the variable costing concept:
Determine the unit cost of goods manufactured, based on (a) the variable costing concept and (b) the absorption costing concept.
Frankenreiter Inc.Variable Costing Income Statement
For the Year Ended December 31, 20Y1 Sales $2,193,000 Variable cost of goods sold: Variable cost of goods manufactured $1,215,400 EInventory, December 31 (164,800) Total variable cost of goods sold 1,050,600 Manufacturing margin $1,142,400 Total variable selling and administrative expenses 265,200 Contribution margin $877,200 Fixed costs: Fixed manufacturing costs $560,500 Fixed selling and administrative expenses 173,400 Total fixed costs 733,900 Income from operations $143,300
Explanation / Answer
Determine the unit cost of goods manufactured, based on (a) the variable costing concept and (b) the absorption costing concept.
Variable costing = 1215400/5900 = 206 per unit
Absorption costing = (1215400+560500)/5900 = 301 per unit