Variable Costing, Value of Ending Inventory, Operating Income Pattison Products,

Question

Variable Costing, Value of Ending Inventory, Operating Income

Pattison Products, Inc., began operations in October and manufactured 40,000 units during the month with the following unit costs:

Total fixed factory overhead is $280,000 per month. During October, 38,400 units were sold at a price of $24, and fixed marketing and administrative expenses were $130,500.

Required:

1. Calculate the cost of each unit using variable costing. Round your final answer to the nearest cent.
$ per unit

2. How many units remain in ending inventory?
units

What is the cost of ending inventory using variable costing?
$

3. Prepare a variable-costing income statement for Pattison Products, Inc., for the month of October.

Pattison Products, Inc.

Variable-Costing Income Statement

For the Month of October

  

$  

Less:

  

  

  

  

Contribution margin

$  

Less:

  

  

  

  

Operating income

$  

4. What if November production was 40,000 units, costs were stable, and sales were 41,000 units? What is the cost of ending inventory?
$

What is operating income for November?

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3. Prepare a variable-costing income statement for Pattison Products, Inc., for the month of October.

Pattison Products, Inc.

Variable-Costing Income Statement

For the Month of October

  

$  

Less:

  

  

  

  

Contribution margin

$  

Less:

  

  

  

  

Operating income

$  

Explanation / Answer

1. 21 per unit

2.Ending inventory = 40000-34800= 1600 units

Amount of inventory = 1600*21 =33600

3.Operating income = 100220

4. Operating income = 134800

Variable cost Direct material 5 Direct labour 3 Variable overhead 1.5 Vriable marketing cost 1.2 Fixed overhead 7 (280000/40000) Fixed marketing cost 3.2625 (130500/40000) Cost per unit 20.9625

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