Bracey Company manufactures and sells one product. The following information per
ID: 2438660 • Letter: B
Question
Bracey Company manufactures and sells one product. The following information pertains to the company’s first year of operations:
The company does not incur any variable manufacturing overhead costs or variable selling and administrative expenses. During its first year of operations, Bracey produced 26,000 units and sold 23,900 units. The selling price of the company’s product is $70 per unit.
Required:
1. Assume the company uses super-variable costing:
a. Compute the unit product cost for the year.
b. Prepare an income statement for the year.
2. Assume the company uses a variable costing system that assigns $16.50 of direct labor cost to each unit produced:
a. Compute the unit product cost for the year.
b. Prepare an income statement for the year.
3. Assume the company uses an absorption costing system that assigns $16.50 of direct labor cost and $16.20 of fixed manufacturing overhead cost to each unit produced:
a. Compute the unit product cost for the year.
b. Prepare an income statement for the year.
4a. Reconcile the difference between the super-variable costing and variable costing net operating incomes.
4b. Reconcile the difference between the super-variable costing and absorption costing net operating incomes.
Variable cost per unit: Direct materials $ 31 Fixed costs per year: Direct labor $ 429,000 Fixed manufacturing overhead $ 421,200 Fixed selling and administrative expenses $ 72,000Explanation / Answer
1 Under super variable costing,Only variable cost are considered as the product cost a. Unit product cost $ Direct materials 31 Unit product cost 31 b. Income statement: Sales (23900*70) 1673000 Less: Cost of goods sold (23900*31) 740900 Gross profit 932100 Less: Direct labor 4,29,000 Fixed manufacturing overhead 4,21,200 Fixed selling and administrative expenses 72,000 9,22,200 Net income 9,900 2 a. Unit product cost $ Direct materials 31 Direct labor 16.5 Unit product cost 47.5 b. Income statement: Sales (23900*70) 1673000 Less: Cost of goods sold (23900*47.5) 1135250 Gross profit 537750 Less: Fixed manufacturing overhead 4,21,200 Fixed selling and administrative expenses 72,000 4,93,200 Net income 44,550 3 a. Unit product cost $ Direct materials 31 Direct labor 16.5 Fixed manufacturing overhead 16.2 Unit product cost 63.7 b. Income statement: Sales (23900*70) 1673000 Less: Cost of goods sold (23900*63.7) 1522430 Gross profit 150570 Less: Fixed selling and administrative expenses 72,000 Net income 78,570 4a. Reconcilation Net income as per super variable costing 9900 Add: Labor cost involved in the inventory (26000-23900)*16.50 34650 Net income as per variable costing 44550 4b. Reconcilation Net income as per variable costing 44550 Add:Fixed manufacturing overhead involved in the inventory (26000-23900)*16.20 34020 Net income as per absorption costing 78570
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