In the coming year, Imre Company expects to sell 56,900 units at $26 each. Imre\
ID: 2629731 • Letter: I
Question
In the coming year, Imre Company expects to sell 56,900 units at $26 each. Imre's controller provided the following information for the coming year.
Units production 60,000
Unit direct materials $9.30
Unit direct labor $2.75
Unit variable overhead $1.65
Unit ?xed overhead* $2.50
Unit selling expense (variable) $2.00
Total ?xed selling expense $65,500
Total ?xed administrative expense $244,000
*The unit ?xed overhead is based on 60,000 units produced.
Required:
1. Calculate the cost of one unit of product under absorption costing.
2. Calculate the cost of one unit of product under variable costing.
3. Calculate operating income under absorption costing for next year.
4. Calculate operating income under variable costing for next year.
Explanation / Answer
You would enter the beginning inventory, at the variable costing and then at the absorption costing method. Check out the link as it will explain it all.
Production per year 97,000
Variable costs (unit)
Direct materials 34
Direct labor____ 17
Variable manufacturing overhead 26
Fixed costs per year
Fixed manufacturing overhead___ 1,940,000
Operating costs_______________ 2,000,000
Units in beginning inventory_____ 10,000
Units produced_______________ 97,000
Units sold___________________ 92,000
Units in ending inventory_______ 15,000
Selling price per unit__________ $137
Absorption Costing Income Statement
Sales _(92,000 x $137 per unit)______ $12,604,000
Less cost of goods sold:
Beginning inventory (10,000 x $97)___ $970,000
Add Cost of goods produced (97,000 x $97) 9,409,000
Goods available for sale_____________ $10,379,000
Less ending inventory (15,000 x $97)_____ 1,455,000
Cost of Goods Sold_________________ $8,924,000
Gross Margin______________________ $3,680,000
Less
Operating expenses_________________ 2,000,000
Net Income________________________ $1,680,000
Variable Costing Income Staement
Sales _(92,000 x $137 per unit)___________ $12,604,000
Less cost of goods sold:
Beginning inventory (10,000 x $77) _________ $770,000
Add Variable production costs (97,000 x $77)_ 7,469,000
Goods available for sale__________________ $8,239,000
Less ending inventory (15,000 x $77)________ 1,155,000
Variable cost of goods sold________________ 7,084,000
Contribution Margin______________________ 5,520,000
Less: Fixed expenses
Fixed Overhead_________________________ 2,522,000
Operating Costs________________________ 2,000,000
Net Income____________________________ $998,000