EXERCISE 5A-2 Super-Variable Costing and Variable Costing Unit Product Costs and

Question

EXERCISE 5A-2 Super-Variable Costing and Variable Costing Unit Product Costs and Income Statements TLO 5-2, LO 5-6 Lyons Company manufactures and sells one product. The following information pertains to the company's first year of operations Varlable cost per unit: Direct materials Fixed costs per year $13 $750,000 $420,000 $110,000 Flxed selling and adminlstrative expenses The company does not incur any variable manufacturing overhead costs or variable selling and administrative expenses. During its first year of operations, Lyons produced 60,000 units and sold 52,000 units. The selling price of the company's product is $40 per unit. Required 1. Assume the company uses super-variable costing a. Compute the unit product cost for the year b. Prepare an income statement for the year 2. Assume the company uses a variable costing system that assigns $12.50 of direct labor cost to each unit produced a. Compute the unit product cost for the year b. Prepare an income statement for the year 3. Prepare a reconciliation that explains the difference between the super- variable costing and variable costing net operating incomes.

Explanation / Answer

1) Super Variable Costing Super-variable costing classifies all direct labor and manufacturing overhead costs as fixed period costs and only direct materials as a variable product cost. Super Variable Costing Direct Material $13.00 Unit product cost for the year $13.00 Lyons Company Income Statement Sales = 52,000 units x $40 $2,080,000.00 Less: Variable Expenses Direct Material = $13 x 52000 units $676,000.00 Contribution Margin $1,404,000.00 Less: Fixed Expenses Direct labor $750,000.00 Fixed manufacturing overhead $420,000.00 Fixed selling and administrative expenses $110,000.00 Total Fixed Cost $1,280,000.00 Net Operating Income $124,000.00 2) Variable Costing Variable Costing Direct Material $13.00 Direct Labour $12.50 Unit product cost for the year $25.50 Lyons Company Income Statement Sales = 52,000 units x $40 $2,080,000.00 Less: Variable Expenses Direct Material = $13 x 52000 units $676,000.00 Direct Labor = $12.50 x 52000 Units $650,000.00 $1,326,000.00 Contribution Margin $754,000.00 Less: Fixed Expenses Fixed manufacturing overhead $420,000.00 Fixed selling and administrative expenses $110,000.00 Total Fixed Cost $530,000.00 Net Operating Income $224,000.00 3) Super-Variable Costing Net Operating Income $124,000.00 Add: Deferred Labor Costs deferred in inventory (60,000 -52,000) units x 12.50 $100,000.00 Variable costing Net operating Income $224,000.00

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.