Chapter 6F 0 Saved Help Save & Ex 5 Che 0 Required information The Foundational
ID: 2575989 • Letter: C
Question
Chapter 6F 0 Saved Help Save & Ex 5 Che 0 Required information The Foundational 15 [LO6-1, LO6-2, LO6-3, LO6-4, Lo6-5) The following information applies to the questions displayed below Diego Company manufactures one product that is sold for $72 per unit in two geographic regions-the East and West regions. The folowing information pertains to the company's first year of operations in which it produced 43,000 units and Part 5 of 15 points sold 38,000 units. eBook Print References Variable costs per unit: Manufacturings Direct materials Direct labor Variable manufacturing overhead 14 Variable selling and administrative Pixed costs per years Fixed nanufacturing overhead Fixed selling and administrative expense 346,000 774,000 The company sold 28,000 units in the East region and 10,000 units in the West region. It determined that $170,000 of its fixed selling and administrative expense is traceable to the West region, $120,000 is traceable to the East region, and the remaining $56,000 is a common flixed expense. The company will continue to incur the total amount of its fixed manufacturing overhead costs as long as it continues to produce any amount of its only product. Foundational 6-5 19
Explanation / Answer
5) and 6) Income statement under Absorption Costing Sales (38000 units x $72) $2,736,000 Less: COGS ((38000 x (22+14+3+774000/43000) $2,166,000 Gross Margin $570,000 part 5 Less: Selling and administrative(38000 x 5)+$346000 $536,000 Net Income(Loss) $34,000 part 6 7) Reconciliation of Variable Costing and Absorption Costing Net Operating Incomes Net operating income(loss) under variable costing -$56,000 Add:Fixed manufacturing overhead costs deferred in inventory under absorption costing (43000-38000) x($774,000/43000) $90,000 Net operating income under absorption costing $34,000 8) 6) BEP units = Fixed cost /(selling price - variable cost) BEP units = (774000+346000)/($72 - $44) 40,000 units Its above the actual sales. above