During its first year of operations, the McCormick Company incurred the followin
ID: 2471715 • Letter: D
Question
During its first year of operations, the McCormick Company incurred the following manufacturing costs: Direct materials, $5 per unit, Direct labor, $3 per unit, Variable overhead, $4 per unit, and Fixed overhead, $200,000. The company produced 25,000 units, and sold 17,500 units, leaving 7,500 units in inventory at year-end. Income calculated under variable costing is determined to be $345,000. How much income is reported under absorption costing?
$345,000
$285,000
$545,000
$405,000
Accurate Metal Company sold 35,000 units of its product at a price of $310 per unit. Total variable cost per unit is $179, consisting of $163 in variable production cost and $5 in variable selling and administrative cost. Compute the manufacturing margin for the company under variable costing.
$10,850,000
$6,265,000
$6,090,000
$5,145,000
$4,970,000
Accurate Metal Company sold 35,000 units of its product at a price of $310 per unit. Total variable cost per unit is $179, consisting of $163 in variable production cost and $5 in variable selling and administrative cost. Compute the manufacturing margin for the company under variable costing.
Explanation / Answer
1.$405,000 income is to be reported under absorption costing. First of all we need to find out missing sale figure to calculate reported under absorption costing. We need to do reverse working as follows.
COGS UNDER VARIBLE COSTING IS $12 WHILE UNDER ABSORBTION COSTING IT IS $20.
Income under varible costing+ fixed overhead = contribution under varible costing
$345,000+$ 200,000=$545,000
Less Cost of goods sold (17500 units*$12)$ 210,000
sales = $755,000
2.Manufacturing margin for the company under variable costing is $5,145,000.
$ $ Direct Material 5 125,000 Direct Labour 3 75,000 Variable overhead 4 100,000 Total V.C 12 300,000 Fixed Overhead 8 200,000 Total 20.00 500,000Related Questions
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