ABC Company reported the following information about the production and sales of
ID: 2445874 • Letter: A
Question
ABC Company reported the following information about the production and sales of its Rubber product:
Direct materials used
$32,000
Direct labour
$20,000
Variable factory overhead
$12,000
Fixed factory overhead
$16,000
Variable selling and administrative expenses
$ 4,000
Fixed selling and administrative expenses
$ 6,000
Beginning inventories
none
Ending inventories
600 units
Sales ($45 per unit)
$63,000
Required: Please provide the below criteria
a) Variable cost per unit
b) The cost of goods sold under variable costing
c) The contribution margin under variable costing
d) The operating income (loss) under variable costing
Direct materials used
$32,000
Direct labour
$20,000
Variable factory overhead
$12,000
Fixed factory overhead
$16,000
Variable selling and administrative expenses
$ 4,000
Fixed selling and administrative expenses
$ 6,000
Beginning inventories
none
Ending inventories
600 units
Sales ($45 per unit)
$63,000
Explanation / Answer
Variable Cost per Unit Direct Material 32000 Direct labour 20000 Variable Overhead 12000 64000 Variable Selling & Admin Overhead 4000 Total 68000 Units Sold 63000/45 1400 Units Manufactured 1400+600 2000 Manufacturing Cost per unit 64000/2000 32 Selling Cost 4000/1400 2.857143 Variable Cost 34.85714 2 Contribution Margin Sales 63000 Variable Cost 68000 Less:- Ending Inventory 32*600 -19200 Contribution Margin 111800 Less: Fixed Cost -16000 -6000 Operating Income 89800
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