DO NOT LEAVE PARTIAL ANSWER. Required information The Foundational 15 [LO6-1, LO
ID: 2563399 • Letter: D
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DO NOT LEAVE PARTIAL ANSWER.
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 $76 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 47,000 units and sold 42,000 units. Variable costs per unit: Manufacturing: Direct materials 26 Direct labor Variable manufacturing overhead Variable selling and administrative Fixed costs per year: Fixed manufacturing overhead Fixed selling and administrative expense 987,000 475,000 The company sold 32,000 units in the East region and 10,000 units in the West region. It determined that $210,000 of its fixed selling and administrative expense is traceable to the West region, $160,000 is traceable to the East region, and the remaining $105,000 is a common fixed expense. The company will continue to incur the total amount of its fixed manufacturing overhead costs as long as it continues to produce any amount of its only product. Foundational 6-1 Required 1. What is the unit product cost under variable costing? Unit product cost 2. What is the unit product cost under absorption costing? t product cost 3. What is the company's total contribution margin under variable costing?Explanation / Answer
Answer 1.
Under Variable Costing:
Unit Product Cost = Direct Materials + Direct Labor + Variable Manufacturing Overhead
Unit Product Cost = $26 + $10 + $2
Unit Product Cost = $38
Answer 2.
Under Absorption Costing:
Unit Product Cost = Direct Materials + Direct Labor + Variable Manufacturing Overhead + Fixed Manufacturing Overhead per unit produced
Unit Product Cost = $26 + $10 + $2 + $987,000 / 47,000
Unit Product Cost = $59
Answer 3.
Contribution Margin per unit = Selling Price - Variable Unit Product Cost - Variable Selling and Administrative per unit
Contribution Margin per unit = $76 - $38 - $4
Contribution Margin per unit = $34
Total Contribution Margin = Contribution Margin per unit * Number of units sold
Total Contribution Margin = $34 * 42,000
Total Contribution Margin = $1,428,000
Answer 4.
Net Operating Income (loss) = Total Contribution Margin - Fixed Manufacturing Overhead - Fixed Selling and Administrative
Net Operating Income (loss) = $1,428,000 - $987,000 - $475,000
Net Operating Income (loss) = -$34,000
Answer 5.
Sales = $76 * 42,000
Sales = $3,192,000
Cost of Goods Sold = $59 * 42,000
Cost of Goods Sold = $2,478,000
Gross Margin = Sales - Cost of Goods Sold
Gross Margin = $3,192,000 - $2,478,000
Gross Margin = $714,000
Answer 6.
Selling and Administrative Expense = Variable Selling and Administrative Expense + Fixed Selling and Administrative Expense
Selling and Administrative Expense = $4 * 42,000 + $475,000
Selling and Administrative Expense = $643,000
Net Operating Income (loss) = Gross Margin - Selling and Administrative Expense
Net Operating Income (loss) = $714,000 - $643,000
Net Operating Income (loss) = $71,000
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