Brooks Company - Total absorption costing (not done in class) The Brooks company

Question

Brooks Company - Total absorption costing (not done in class)

The Brooks company manufactures furniture including tables.

Assignment:
You have been provided with the information below for the table production line.
Prepare a profit analysis using total absorption costing methodology assuming sales units are 9 000 & production is 12 000 (this is the first year of activity).


Starting inventory Nil
Wood 35 per unit
Other materials 2 per unit
Material handling 20 000 estimated costs per year
Direct labor 20 per unit
Line supervisor 40 000 estimated costs per year
Line equipment depreciation 30 000 estimated costs per year
Share of factory rent 50 000 estimated costs per year
Shipping costs 8 per unit
Sales commissions 5 per unit
Share of General & administrative expenses 60 000 estimated costs per year
Share of Marketing & sales expenses 50 000 estimated costs per year
Sales price 110 per unit

Explanation / Answer

Absorption Costing Unit Product Cost Direct Material 35.00 Other Material 2.00 Direct Labor 20.00 Fixed Manufacturing OH Material Handling 1.67 ( 20,000 / 12 ,000) Line Suoervisor 3.33 (40,000 / 12,000) Line Equipment Depreciation 2.50 (30,000 / 12,000) Factory Rent 4.17 (50,000 / 12,000) Absorption Costing Unit Product Cost 68.67 Absorption Costing -Cost of Goods Sold Absorption Costing Unit Product Cost 68.67 Units Sold 9,000.00 Absorption Costing Unit ,Cost Of Goods Sold 618,000.00 Selling And Administrative Expenses Sales Commisssions 45,000.00 (5 * 9000) Selling and Administrative Expenses 60,000.00 Marketing and Selling Expenses 50,000.00 Total Selling and Administrative Expenses 155,000.00 Absorption Costing Income Statement Sales 990,000.00 Cost of Goods Sold (618,000.00) Gross Margin 372,000.00 Less: Administrative Expenses (155,000.00) Net Income 217,000.00

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