Exercise 2) During the year, BrightLight Inc. produced 65,000 units of their spe

Question

Exercise 2) During the year, BrightLight Inc. produced 65,000 units of their specialty lights. The specialty lights sell for $107 each. Beginning inventory of the specialty lights was 6,565. At the end of the year a physical inventory count revealed that only 5,656 remained. The cost accountant at BrightLight Inc. determined the following variable costs for the production of the specialty lights (costs are per unit): Direct Materials Direct Labor Variable Overhead Variable Selling& Admin. $23.75 $14.05 S 4.20 S 8.00 The cost accountant also informed you that the company incurred total fixed overhead in the amount of $991,250 and total fixed selling and administrative costs of $291,000 during the year. Required a) Prepare an Income Statement using absorption costing. b) Calculate the cost of ending inventory under absorption costing. c) Prepare an Income Statement using variable costing. d) Calculate the cost of ending inventory under variable costing.

Explanation / Answer

3 Variable costing Product cost Direct material 23.75 Direct labor 14.05 Variable manufacturing overhead 4.20 Variable manufacturing cost 42.00 Units manufactured 65000 Units sold 65,909 (6565+65000-5656) Income statement Sales revenue 7052263 Less Variable expense Variable manufacturing cost 2768178 Variable marketing and admin expense $8 263636 Total variable expense 3031814 Contribution margin 4020449 Less Fixed cost Fixed manufacturing expense 991250 Fixed Marketing and Admin expense 291000 Total fixed expenses 1282250 Net operating income 2738199 4 Edning inventory 5656*42 237552 1 Absorption costing Product cost Direct material 23.75 Direct labor 14.05 Variable manufacturing overhead 4.20 Fixed manufacturing (991250/65000) 15.25 Total product cost 57.25 Units produced 65000 Units sold 65,909 (6565+65000-5656) Income statement Sales revenue 7052263 cost of goods sold Beginning inventory 375846.25 (6565*57.25) cost of goods manufactured 3721250 Add Goods available for sale 4097096.25 Ending inventory 323806 (5656*57.25) Less Cost of goods sold 3773290.25 Gross profit 3278972.75 Selling and admin expenses Less Variable marketing and admin expense 527272 Fixed marketing and selling expense 291000 Total Selling and admin expenses 818272 Net operating income 2460700.75

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

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