Income Statements under Absorption and Variable Costing In the coming year, Plan
ID: 2520539 • Letter: I
Question
Income Statements under Absorption and Variable Costing In the coming year, Planet Company expects to sell 28,700 units at $45 each. Planet's controller provided the following information for the coming year. Units production Unit direct materials Unit direct labour Unit variable overhead Unit fixed overhead* Unit selling expense (variable) Total fixed selling expense Total fixed administrative expense * The unit fixed overhead is based on 30,000 units produced Required 1. Calculate the cost of one unit of product under absorption costing. Round answer to the nearest cent. Use rounded amount in subsequent requirements 30,000 $13.23 $3.66 $2.19 $3.33 $2.00 $65,500 $231,000 2. Calculate the cost of one unit of product under variable costing. Round answer to the nearest cent. Use rounded amount in subsequent requirements 3. Calculate operating income under absorption costing for next year. 4. Calculate operating income under variable costing for next year.Explanation / Answer
1) Unit product cost under absorption costing = Direct material+direct labour +variable manufacturing overhead+fixed manufacturing overhead
= 13.23+3.66+2.19+3.33
Unit product under absorption costing = 22.41 per unit
2) Unit product cost under variable costing = Direct material+direct labour +variable manufacturing overhead
= 13.23+3.66+2.19
Unit product under variable costing = 19.08 per unit
3) Net operating income under absorption costing = (45-22.41-2)*28700-65500 = 525433
4) Net operating income under variable costing = (45-19.08-2)*28700-165400 = 521104