1. 2. (Round all amounts to two decimal places) Sportswear Inc. of Scottsdale pr
ID: 2502547 • Letter: 1
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(Round all amounts to two decimal places) Sportswear Inc. of Scottsdale produces sports and workout apparel for men and women. One of the products produced is "Smart Workout Socks," which absorb sweat and keep feet dry and cool. Selected data for the past year follow: (Round all amounts to two decimal places) Calculate the total variable cost per unit using the variable costing method. Calculate the total variable cost per unit using the absorption costing method In good order and form, prepare an income statement (in total) for Sportswear using the variable costing method. In good order and form, prepare an income statement (in total) for Sportswear using the absorption costing method.Explanation / Answer
1] COST PER UNIT USING VARIABLE COSTING
DIRECT MATERIAL P.U.[300000/500000] = 0.60
DIRECT LABOR P.U.[650000/500000] = 1.30
VARIABLE MANUFACTURING OVERHEAD P.U [50000/500000] = 0.10
VARIABLE NON MANUFACTURING COST [100000/500000] = 0.20
COST PER UNIT UNDER VARIABLE COSTING = 2.20 P.U.
2]COST PER UNIT USING ABSORPTION COSTING
DIRECT MATERIAL P.U.[300000/500000] = 0.60
DIRECT LABOR P.U.[650000/500000] = 1.30
VARIABLE MANUFACTURING OVERHEAD P.U[50000/500000] = 0.10
FIXED MANUFACTURING OVERHEAD P.U. [135000/500000] =0.27
FIXED OH UNIT COST P.U.= 0.25
NON MANUFACTURING COST P.U. [(100000+125000)/500000] = 0.45
COST PER UNIT UNDER ABSORPTION COSTING = 2.97 P.U.
3]INCOME STATEMENT UNDER VARIABLE COSTING METHOD :-
SALES [400000*5] = 2000000
LESS:-VARIABLE COST [2.20*400000] = (880000)
CONTRIBUTION = 1120000
LESS:-FIXED COST
a) FIXED MANUFACTURING OVERHEAD = (135000)
b) FIXED OH UNIT COST [0.25*500000] = (125000)
c) Fixed selling cost = (125000)
NET PROFIT = 735000
4] INCOME STATEMENT UNDER ABSORPTION COSTING METHOD :-
SALES [400000*5] = 2000000
LESS:-VARIABLE COST [2.97*400000] = (1188000)
NET PROFIT = 812000
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