Brock Company produces and sells an industrial product. The company has just ope

Question

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's operation Beginning inventory Units produced Units sold Selling price per unit Selling and administrative expenses: 0 41,000 36,000 84 Variable per unit Fixed (total) $555,000 S 16 4 Manufacturing costs Direct materials cost per unit Direct labor cost per unit Variable manufacturing overhead cost per uni S Fixed manufacturing overhead cost (total) $ 738,000 Required 1. Assume that the company uses absorption costing a. Determine the unit product cost. Unit product cost b. Prepare an income statement for the month. (Input all amounts as positive values except losses which should be indicated by a minus sign.) Absorption Costing Income Statement Sales $ 3024000 Cost of goods sold Gross margin Selling and administrative expenses Net operating income

Explanation / Answer

As per Absorbtion Costing : As per Variable Costing : Computation of Production cost per Unit Computation of Production cost per Unit Particulars Amount $ Particulars Amount $ Units produced         41,000 Units produced                 41,000 Manufacturing cost: Manufacturing cost: Direct Materials                16 Direct Materials                        16 Direct Labour                  8 Direct Labour                          8 Variable Manufacturing OH                  4 Variable Manufacturing OH                          4 Total                28 Total                        28 Total Cost 41,000 *28    1,148,000 Total Cost 41,000 *28            1,148,000 Add: Fixed Manufacturing Overheads       738,000 Total Production Cost    1,886,000 Total Production Cost            1,148,000 Production Cost Per Unit is = 1886000/41000 Production Cost Per Unit is = 1148000/41000 Production Cost Per Unit =                46 Production Cost Per Unit =                        28 Income Statement Income Statement Particulars Amount $ Particulars Amount $ Sales (36,000 *84)    3,024,000 Sales (36,000 *84)            3,024,000 Less: Cost of Goods Sold Less: Cost of Goods Sold Production Cost as above (1,148,000) Production Cost as above           (1,148,000) Gross Margin    1,876,000 Variable Selling Expesnes (36,000*3)              (108,000) Contribution            1,768,000 Variable Selling Expesnes (36,000*3)      (108,000) Less: Fixed Cost               738,000 Fixed Selling Expenses      (555,000) Fixed Selling Expenses              (555,000) Net Income    1,213,000 Net Income            1,951,000

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