For the Quarter Ended March 31 Sales (25,000 units) Variable expenses 5 907,500
ID: 2542965 • Letter: F
Question
For the Quarter Ended March 31 Sales (25,000 units) Variable expenses 5 907,500 Variable cost of goods sold Variable selling and administrative 5 305,000 195,000 500,000 407,500 Contribution margin Fixed expenses Fixed manufacturing overhead Fixed selling and administrative 228,800 217,000 443,800 Net operating loss S (36,300) Ms. Tyler is discouraged over the loss shown for the quarter, particularly because she had planned to use the statement as support for a bank loan. Another friend, a CPA, insists that the company should be using absorption costing rsther than variable costing and argues that if absorption costing had been used the company would probably have reported at least some profit for the quarter At this point, Ms. Tyler is manufacturing only one product, a swimsuit. Production and cost data relating to the swimsuit for the first quarter follow: Units produced Units sold Variable costs per unit 28,000 25,000 Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative 5 7.50 5 2.80 5 1.90 5 7.80 Required 1. Complete the following: s. Compute the unit product cost under absorption costing. (Round your intermediate and final answers to 2 decimal places.) duct cost b. Redo the company's income statement for the quarter using sbsorption costing. Round your intermediate calculations to 2 decimal places.) Tami's Creations, Inc. Absorption Costing Income Statement Total Net operating income (loss) c. Reconcile the variable and absorption costing net operating income (loss) figures. Round your intermediate calculations to 2 decimal places.) Reconciliation of Variable Costing and Absorption Costing Net Operating Incomes Variable costing net operating income (loss) Ab sorption costing net operating incomeExplanation / Answer
Answer 1-a. Calculation of Cost per Unit Under Absorption Costing 28,000 Units Manufactured Direct Material 7.50 Direct Labor 2.80 Variable Manufacturing Overhead 1.90 Fixed Manufacturing Overhead - $226,800 / 28,000 Units 8.10 Total Cost per Unit 20.30 Note: Selling and administrative expenses (both variable and fixed) are not relevant for the computation of unit product cost in both absorption costing & variable costing. Answer 1-b. Tami's Creation Inc. Absorption Costing Income Statement 28,000 Units Manufactured Sales -25,000 Units X $36.30 907,500.00 Cost of Goods Sold - 25,000 Units X $20.30 507,500.00 Gross Profit 400,000.00 Selling & Administrative Expenses Fixed Selling & Administrative Expenses 217,000.00 Variable Selling & Administrative Expenses 195,000.00 Total Selling & Administrative Expenses 412,000.00 Income From Operations (12,000.00) Answer 1-c. Reconciliation Statement Variable Costing Operating Income (Loss) (36,300.00) Add: Fixed MOH deferred in inventory Under Absorption Costing - 3,000 Units X $8.10 24,300.00 Absorption Costing Operating Income (Loss) (12,000.00) Answer 3-a. Tami's Creation Inc. Variable Costing Income Statement For the Second Qtr 28,000 Units Manufactured Sales - 31,000 Units X $36.30 1,016,400.00 Variable Expenses Variable Cost of Goods Sold - 31,000 Nos X ($7.50 + $2.80 + $1.90) 378,200.00 Variable Selling & Administrative Expenses - 31,000 X $7.80 241,800.00 620,000.00 Contribution Margin 396,400.00 Fixed Costs: Fixed MOH 226,800.00 Fixed Selling & Administrative Expenses 217,000.00 443,800.00 Income From Operations (47,400.00) Answer 3-b. Calculation of Cost per Unit Under Absorption Costing 28,000 Units Manufactured Direct Material 7.50 Direct Labor 2.80 Variable Manufacturing Overhead 1.90 Fixed Manufacturing Overhead - $226,800 / 28,000 Units 8.10 Total Cost per Unit 20.30 Tami's Creation Inc. Absorption Costing Income Statement For The Second Qtr 28,000 Units Manufactured Sales - 31,000 Units X $36.30 1,016,400.00 Cost of Goods Sold 629,300.00 Gross Profit 387,100.00 Selling & Administrative Expenses Fixed Selling & Administrative Expenses 217,000.00 Variable Selling & Administrative Expenses 241,800.00 Total Selling & Administrative Expenses 458,800.00 Income From Operations (71,700.00) Cost of Goods Sold: Second Qtr Production -28,000 Units X $20.30 568,400.00 Beginning Inventory - 3,000 Units X $20.30 60,900.00 Total Cost of Goods Sold 629,300.00 Answer 3-c. Reconciliation Statement Variable Costing Operating Income (Loss) (47,400.00) Less: Fixed MOH released from inventory Under Absorption Costing - 3,000 Units X $8.10 (24,300.00) Absorption Costing Operating Income (Loss) (71,700.00)