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Please create absorption and variable costing income statement using data below.

ID: 2460903 • Letter: P

Question

Please create absorption and variable costing income statement using data below. And please show work

Continue to assume that 7,800 t shirts will be made and sold in the first year. What is your product cost per unit under absorption costing? What is your product cost per unit under variable costing? Create absorption and variable costing income statement

Variable Costs Cost Item Cost per Fixed costs Cost Item Cost per T-Shirt T-shirt Manufacturing Direct materials $3.75 Rent (2500/.9) $2,250 Design (300/5) $25 Computer (6000/3=2000, 2000*.9=1800) $1,800 Transfer paper (400/1000) $400 $0.40 Salaries Expense 10,000 Ink cartridges (50/500) $50 $0.10 Heat press (4500/3) $1,500 Laser paper (20/200) 0.1 Storage $125 Rent (2500/.1) $250 Salaries $12,000 Non-Manufacturing Wrapping paper $0.20 Computer (2000*.1=200) $200 Packing (8/10+8/20) 1.2 Insurance $3,600 Flyers (50/5) 10 Promotion (1000*4) 4000 Total Variable Manufacturing Costs: = $29.35 Total Variable non-manufacturing costs: $11.40 Total Variable costs $40.75 Total fixed manufacturing costs per year: $15,675 Total fixed non-manufacturing costs per year: $20,050 Total fixed cost $35,725 4. Cost formula for manufacturing costs $353,575.00 5. If for the first year, sales=7,800 t shirts, and selling prince=$15 per t shirt Total Sales: 117000 Net profit: ($236,575.00) Loss

Explanation / Answer

Answer

Answer 1

Product cost per unit (variable costing)

Figures in $

Particulars

Amount

Total variable manufacturing costs

29.35

(3.75+25+0.4+0.1+0.1)

Product cost per unit

29.35

Answer 2

Product cost per unit (Absorption costing)

Figures in $

Particulars

Amount

Total variable manufacturing costs

a

29.35

Fixed manufacturing Overhead

b

2.01

(15675/7800)

Product cost per unit   (a+b)

31.36

Answer 3

Income statement (Variable costing)

Figures in $

Particulars

Amount

Sales

a

117000

(7800*15)

Total variable costs

b

317850

(7800*40.75)

Contribution (a-b)

c

-200850

Toal Fixed costs

d

35725

Net income   (c-d)

-236575

Answer 4

Income statement (Absorption costing)

Figures in $

Particulars

Amount

Sales

a

117000

(7800*15)

Total manufacturing variable costs

b

228930

(7800*29.35)

Fixed manufacturing costs

c

15675

Cost of goods sold (b+c)

d

244605

Variable non-manufacturing cost

e

88920

(7800*11.40)

Fixed non-manufacturing cost

f

20050

Cost of sales (d+e+f)

g

353575

Net income (a-g)

-236575

Product cost per unit (variable costing)

Figures in $

Particulars

Amount

Total variable manufacturing costs

29.35

(3.75+25+0.4+0.1+0.1)

Product cost per unit

29.35

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