Required information Exercise 6-9 Income statement under absorption costing and

Question

Required information Exercise 6-9 Income statement under absorption costing and variable costing Lo P1, P2 The following information applies to the questions displayed below. Cool Sky reports the following costing data on its product for its first year of operations. During this first year, the company produced 44,000 units and sold 36,000 units at a price of $140 per unit. Manufacturing costs Direct materials per unit Direct labor per unit Variable overhead per unit Fixed overhead for the year 60 $528,000 Selling and administrative costs Variable selling and administrative cost per unit Fixed selling and administrative cost per year 10 $110,000

Explanation / Answer

Unit product cost under Absorption Costing Direct materials per unit 60 direct labor per unit 22 variable overhead per unit 8 fixed overhead (528,000/44000) 12 unit product cost under Absorption costing 102                 Absorption Costing Income Statement               sales (36000*140) 5040000 less:Cost of goods sold Direct Materials (36000*60) 2160000 Direct labor (36000*22) 792000 Variable overhead per unit (36000*8) 288000 fixed manufacturing Oh (36000*12) 432000 3672000 gross profit 1368000 selling and administrative costs variable selling & adm (36000*10) 360000 fixed selling & adm 110,000 470,000 Net Operating income 898,000 2a) Variable per unit product cost using: costing Direct materials per unit 60 direct labor per unit 22 variable overhead per unit 8 cost per unit 90 2b) Variable costing income statement sales 5040000 less:Variable costs variable cost of goods sold (36000*90) 3240000 variable selling & adm (36000*10) 360,000 total variable cost 3,600,000 Contribution margin 1,440,000 fixed expense fixed manufacturing overhead 528,000 fixed selling & adm cost 110,000 total fixed expense 638,000 net income 802,000

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