Maffei Company, which has only one product, has provided the following data conc
ID: 2348348 • Letter: M
Question
Maffei Company, which has only one product, has provided the following data concerning its most recent month of operations:Selling price $ 175
Units in beginning inventory 0
Units produced 9,500
Units sold 8,000
Units in ending Inventory 1,500
Variable costs per unit:
Direct materials $ 55
Direct labor $ 38
Variable manufacturing overhead $ 2
Variable selling and admin $ 10
Fixed costs:
Fixed manufacturing overhead $ 300,000
Fixed selling and admin $ 125,000
Required:
a. What is the unit product cost for the month under variable costing?
b. What is the unit product cost for the month under absorption costing?
c. Prepare an income statement for the month using the variable costing method.
d. Prepare an income statement for the month using the absorption costing method.
Explanation / Answer
a)Under Variable costing, unit product cost
= Direct labor cost + direct materials cost + variable manufacturing overhead
= $38+$55+$2
= $95
b) Under absorption costing, unit production cost
= cost under variable costing + fixed manufacturing overhead
= $95 + ($300,000/9500)
= $126.58
c)
Revenue (8000*$175) 1,400,000
COFM (8000*$95) 760,000
Gross Margin 640,000
Minus
Variable sales cost (8000*10) 80,000
Fixed Overhead cost 300,000
Fixed Sales Expense 125,000
Net Income 135,000
d)
Revenue (8000*$175) 1,400,000
COFM (8000*$126.58) 1,012,632
Gross Margin 387,368
Minus
Variable sales cost (8000*10) 80,000
Fixed Sales Expense 125,000
Net Income 182,368
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