Wilson Decorative Home Goods produces and sells a decorative pillow for $97.50 p
ID: 2419790 • Letter: W
Question
Wilson Decorative Home Goods produces and sells a decorative pillow for $97.50 per unit. In the firs month of operation, 2,000 units were produced and 1,750 units were sold. Actual fixed costs are the same as the amount budgeted for the month. Other information for the month includes:
Variable manufacturing costs: $22.10 per unit
Variable marketing costs: $3.90 per unit sold
Fixed manufacturing costs: $13.00 per unit produced
Administrative expenses, all fixed: $39,000 total
Ending inventories:
Direct materials: 0
WIP: 0
Finished Goods: 250 units
1. What is the product cost per unit using variable costing?
2. What is the product cost per unit using absorption costing?
3. What is the total contribution margin using variable costing?
4. What is the net operating income using variable costing?
5. What is the net operating income using absorption costing?
6. Reconcile the difference between the operating income using absorption costing and the operating income using variable costing.
Explanation / Answer
Answere 1 & 2
Answer 3
Total contribution margin using variable costing => 97.50 - 22.10 - 3.90 => $ 71.50
Total contribution margin using variable costing => $ 71.50
Answer 4
Net operating income using variable costing
Less: Fixed Expenses
Answer 5
Net operating income using absorption costing
Answer 6
Reconciliation of net operating income:
Net operating income under variable costing $ 60125
Fixed manufacturing overhead cost deferred (250 * 13) $ 3250
Net operating income under absorption costing $ 63375
Particulars Absorption costing per unit Variable Costing per unit Variable manufacturing costs 22.10 22.10 Variable marketing costs 3.90 3.90 Fixed manufacturing costs 13 - Unit product cost 39 26Related Questions
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