Cost of Goods Manufactured, using Variable and Absorption Costing On June 30, th
ID: 2528942 • Letter: C
Question
Cost of Goods Manufactured, using Variable and Absorption Costing
On June 30, the end of the first year of operations, Johnson Industries, Inc., manufactured 5,500 units and sold 4,700 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.
Johnson Industries, Inc.Variable Costing Income Statement
For the Year Ended June 30, 2016 Sales $1,645,000 Variable cost of goods sold: Variable cost of goods manufactured $924,000 Less inventory, June 30 134,400 Variable cost of goods sold 789,600 Manufacturing margin $855,400 Variable selling and administrative expenses 197,400 Contribution margin $658,000 Fixed costs: Fixed manufacturing costs $423,500 Fixed selling and administrative expenses 131,600 555,100 Income from operations $102,900
Explanation / Answer
SOLUTION
Variable costing-
Unit cost of goods manufactured = Variable cost of goods manufactured / No. of units manufactured
= $924,000 / 5,500
= $168
Absorption costing-
Unit cost of goods manufactured
= (Variable cost of goods manufactured + Fixed manufacturing costs) / No. of units manufactured
= ($924,000 + $423,500) / 5,500
= $1,347,500 / 5,500
= $245