Problem 6-16A Variable and Absorption Costing Unit Product Costs and Income Stat
ID: 2900752 • Letter: P
Question
Problem 6-16A Variable and Absorption Costing Unit Product Costs and Income Statements; Explanation of Difference in Net Operating Income [LO1, LO2, LO3]
Brock Company produces and sells an industrial product. The company has just opened a new plant to manufacture the product, and the following cost and revenue data have been provided for the first month of the plant
Brock Company produces and sells an industrial product. The company has just opened a new plant to manufacture the product, and the following cost and revenue data have been provided for the first month of the plant
Explanation / Answer
To find COGS you use only the manufacturing costs and the actual units sold
Direct materials cost per unit $ 14 x 42,000 = $588,000
Direct labor cost per unit $ 7 x 42,000 = $294,000
Variable manufacturing overhead cost per unit $ 2 x 42,000 = $84,000
Fixed manufacturing overhead cost (total) 42,000 / 47,000 x $846,000 = $756,000*
*This is the portion of total fixed costs that are applied to the units sold.
588,000 + 294,000 + 84,000 + 756,000 = $1,722,000 COGS