Exercise 8-30 Segmented Income Statements, Inventory Valuation For the coming ye
ID: 2418851 • Letter: E
Question
Exercise 8-30 Segmented Income Statements, Inventory Valuation
For the coming year, Paulson Computers Inc. expects to produce 144,000 computers. Of these, 64,000 will be consumer (personal) computers and 80,000 will be small business computers. Common fixed overhead is $1,700,000. Additional information for the coming year is as follows:
Consumer Computers
Small Business Computers
Price
$ 640
$ 1,675
Unit direct materials
490
1,180
Unit direct labor
90
310
Unit variable overhead
23
50
Unit variable selling expense
35
65
Total direct fixed overhead
120,000
350,000
Fixed selling and administrative expense for Paulson Computers is $2,960,000 per year.
Required:
1.CONCEPTUAL CONNECTION Calculate the unit variable cost under variable costing. Is this cost the same as unit variable product cost? Why or why not?
2.Prepare a segmented variable-costing income statement for next year. The segments correspond to product lines: consumer computers and small business computers.
Use the following information for Exercises 8-31 and 8-32:
Ranger Company purchases 17,280 units of Product Beta each year in lots of 864 units per order. The cost of placing one order is $10, and the cost of carrying one unit of product in inventory for a year is $6.
Consumer Computers
Small Business Computers
Price
$ 640
$ 1,675
Unit direct materials
490
1,180
Unit direct labor
90
310
Unit variable overhead
23
50
Unit variable selling expense
35
65
Total direct fixed overhead
120,000
350,000
Explanation / Answer
1)
Unit variable product costs are different from the unit variable cost of the computers. The reason is unit variable product cost is the unit variable production cost of the computers, whereas unit variable cost of the computers are the unit variable cost of the computers sold that is including the variable operating expenses like selling expenses.
2)
Consumer computer ($) small business computer($) Unit direct materials 490 1180 Unit direct labour 90 310 unit variable overhead 23 50 Unit Product cost 603 1540 Unit variable selling expense 35 65 Unit variable cost 638 1605Related Questions
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