Cost of Goods Manufactured, using Variable and Absorption Costing On December 31
ID: 2561362 • Letter: C
Question
Cost of Goods Manufactured, using Variable and Absorption Costing
On December 31, the end of the first year of operations, Frankenreiter Inc., manufactured 4,800 units and sold 4,100 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 $902,000 Variable cost of goods sold: Variable cost of goods manufactured $508,800 Ending inventory (74,200) Total variable cost of goods sold 434,600 Manufacturing margin $467,400 Total variable selling and administrative expenses 106,600 Contribution margin $360,800 Fixed costs: Fixed manufacturing costs $230,400 Fixed selling and administrative expenses 73,800 Total fixed costs 304,200 Income from operations $56,600
Explanation / Answer
Unit cost of goods manufactured :
Cost of Goods Manufactured per unit :
Variable Costing : Variable Cost of Goods Manufactured / Number of units produced = $ 508,800 / 4,800 = $ 106
Absorption Costing : ( Variable Cost of Goods Manufactured + Fixed Manufacturing Costs) / Number of Units Produced = $ ( 508,800 + 230,400 ) / 4,800 = $ 154.
Unit cost of goods manufactured Variable Costing $ 106 Absorption Costing $ 154