Required information The Foundational 15 (LO6-1, LO6-2, LO6-3, Lo6-4, LO6-5) The
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Required information The Foundational 15 (LO6-1, LO6-2, LO6-3, Lo6-4, LO6-5) The following information applies to the questions displayed below) Diego Company manufactures one product that is sold for $81 per unit in two geographic regions-the East and West regions. The following information pertains to the company's first year of operations in which it produced 52,000 units and sold 47000 units. Variable costs per unit: Manufacturing: Direct materialts 20 20 Direct labor Variable manufacturing overhead Variable selling and administrative Fixed costs per year: Pixed manufacturing overhead Fixed selling and administrative expense 936,000 552,000 The company sold 35,000 units in the East region and 12,000 units in the West region. It determined that $260,000 of its fixed selling and administrative expense is traceable to the West region, $ remaining $82,000 manufacturing overhead costs as long as it continues to produce any amount of its onl 210,000 is traceable to the East region, and the is a common fixed expense. The company will continue to incur the total amount of its fixed Foundational 6-1 Required: 1. What is the unit product cost under variable costing? cost
Explanation / Answer
Q 6-1 Unit Product Cost Note Under variable costing (or Direct Costing), only the variable manufacturing costs are included in unit product costs,and assigned to inventory. Selling and Administrative costs will be excluded, as they are period costs. Variable Selling and Administrative expenses are not included in Cost of Goods Sold. S.No Particulars Amount $ 1 Direct Materials 20 2 Direct Labor 20 3 Variable Manufacturing Overhead 4 Answer Total Unit Product Cost 44 Q 6-2 Unit Product Cost under Absorption costing Note Under Absorption costing, all costs or factors of production, ie., Direct materials, Direct labor, Variable and Fixed manufacturing overheads are assigned to inventory. Therefore, Absorption costing assigns all manufacturing costs to products. S.No Particulars Total cost/Unit 1 Direct Materials 20 2 Direct Labor 20 3 Variable Manufacturing Overhead 4 4 Fixed Manufacturing Overhead-See Note 18 Answer Total Unit Product Cost 62 Note Fixed Overhead Manufacturing cost/ Units of Production Q 6-3 Contribution Margin under Variable Costing S.No Particulars Per Unit East Region West Region Total $ A Sales Units 35000 12000 47000 B Sales Value $ 81 2,835,000 972,000 3,807,000 Less: C Variable Costs: 1 Direct Materials 20 700,000 240,000 940,000 2 Direct Labor 20 700,000 240,000 940,000 3 Variable Manufacturing Overhead 4 140,000 48,000 188,000 4 Variable Selling and Admin Overheads 6 210,000 72,000 282,000 C Total Variable Costs 1,750,000 600,000 2,350,000 D Contribution Margin (B - C) 1,085,000 372,000 1,457,000 E Contribution Margin % - D/ B*100 38.27% 38.27% 38.27% Answer Total Contribution Margin under variable costing 1,457,000 Q 6-4 Net Income (Loss) under variable costing S.No Particulars Per Unit East Region West Region Common Total A Sales Units 35000 12000 47000 B Sales Value $ 81 2,835,000 972,000 3,807,000 Less: C Variable Costs: 1 Direct Materials 20 700,000 240,000 940,000 2 Direct Labor 20 700,000 240,000 940,000 3 Variable Manufacturing Overhead 4 140,000 48,000 188,000 4 Variable Selling and Admin Overheads 6 210,000 72,000 282,000 C Total Variable Costs 1,750,000 600,000 2,350,000 D Contribution Margin (B - C) 1,085,000 372,000 1,457,000 E Fixed Costs: 1 Fixed Manufacturing Overhead 936,000 2 Fixed Selling and Administrative Exp 210000 260000 82,000 552,000 E Total Fixed Costs 1,488,000 F Net Income/ (Loss) (D - E) (31,000) Answer Total Net Inome / (Loss) under Variable Costing (31,000)
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