Paint More, LLC, has organized a new division to manufacture and sell specialty
ID: 2467730 • Letter: P
Question
Paint More, LLC, has organized a new division to manufacture and sell specialty paint. The division’s monthly costs are shown below:
Manufacturing costs:
Variable costs per unit: Direct materials $12
Variable manufacturing overhead $1 Fixed manufacturing overhead costs (total) $100,000
Selling and administrative costs: Variable 7% of sales Fixed (total) $31,000 Because the production is highly automated, the company includes its labor costs in its fixed manufacturing overhead. The gallons of paint sell for $68 each.
During September, the first month of operations, the following activity was recorded: Units produced 5,000 Units sold 4,000
Instructions:
Submit an Excel document with each tab labeled by item number that demonstrates the following:
1.Compute the unit product cost under:
a.Absorption costing
b.Variable costing
2.Prepare an absorption costing income statement for September
3.Prepare a contribution format income statement for September using variable costing
Explanation / Answer
Paint More LLC All Amounts in $ 1. a. Unit Product Cost under Absorption Costing Direct Materials 12 Variable Manufacturing Overhead 1 Fixed Manufacturing Overhead 20 Product Cost 33 b. Unit Product Cost under Variable Costing Direct Materials 12 Variable Manufacturing Overhead 1 Product Cost 13 2. Absorption Costing Income Statement for September Sales 272000 Cost of Goods Sold 132000 Contribution Margin 140000 Variable Selling & Admin Exp 19040 Fixed Selling & Admin Exp 31000 50040 Net Income 89960 3. Contribution Income Format statement using Variable Costing Sales 272000 Cost of Goods Sold Variable Costs 52000 Fixed Manufacturing Overhead 100000 152000 Contribution Margin 120000 Variable Selling & Admin Exp 10640 Fixed Selling & Admin Exp 31000 41640 Net Income 78360
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