Qasimi Company, which has only one product, has provided the following data conc
ID: 2503637 • Letter: Q
Question
Qasimi Company, which has only one product, has provided the following data concerning its most recent month of operations:
Selling price
$105
Units in beginning inventory
0
Units produced
20,000
Units sold
17,000
Units in ending inventory
3,000
Variable costs per unit:
Direct materials
$32
Direct labor
$27
Variable manufacturing overhead
$8
Variable selling and administrative
$5
Fixed Costs
Fixed manufacturing overhead
$220,000
Fixed selling and administrative
$170,000
Required:
Selling price
$105
Units in beginning inventory
0
Units produced
20,000
Units sold
17,000
Units in ending inventory
3,000
Variable costs per unit:
Direct materials
$32
Direct labor
$27
Variable manufacturing overhead
$8
Variable selling and administrative
$5
Fixed Costs
Fixed manufacturing overhead
$220,000
Fixed selling and administrative
$170,000
Explanation / Answer
1] Unit product cost for the month under variable costing = TOTAL VARIABLE COST + [FIXED COST/NO. OF UNITS PRODUCED ]
= (32+27+8+5) + [(220000+170000)/20000]
= 72 + 19.5
= $91.5 PER UNIT
2]Unit product cost for the month under absorption costing = TOTAL VARIABLE COST + [FIXED COST/NO. OF UNITS SOLD]
= (32+27+8+5) + [(220000+170000)/17000]
= 72 + 22.94
= $94.94 PER UNIT
3]Income statment for the month using variable costing method:-
SALES (105*17000) = 1785000
LESS:-VARIABLE COST [(32+27+8+5)*17000] = (1224000)
LESS:-FIXED COST [(220000+170000)/20000 *17000] = (331500)
PROFIT = 229500
4]Income statment for the month using absorption costing method:-
SALES (105*17000) = 1785000
LESS:- VARIABLE COST [(32+27+8+5)*17000] = (1224000)
LESS:-FIXED COST (220000+170000) = (390000)
PROFIT = 171000