Required information The Foundational 15 (L06-1, L06-2, LO6-3, LO64, LO65) The f

Question

Required information The Foundational 15 (L06-1, L06-2, LO6-3, LO64, LO65) The following information applies to the questions displayed below) Diego Company manufactures one product that is sold for $72 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 43,000 units and sold 38,000 units Variable costs per unitr Manufacturing Direct materials Direct labor Variable manufacturing overhead 14 Variable selling and administrative Fixed costs per yeari Pixed manufacturing overhead Pixed selling and administrative expense 346,000 774,000 The company sold 28,000 ungs in the East region and 10,000 units in the West region. It determined that $170,000 of its fixed selling and administrative expense is traceable to the West region, $120,000 is traceable to the East region, and the remaining $56,000 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 6-15

Explanation / Answer

East West Total Production (Units)                43,000              38,000                81,000 Sales (units)                28,000              10,000                38,000 Total Manufacturing Fixed Ohs            7,74,000 Fixed Cost Allocated to Sales            2,67,556              95,556            3,63,111 Gross Margin Under absorption costing Sales Value          20,16,000          7,20,000          27,36,000 Total V. Cost          12,32,000          4,40,000          16,72,000 Total Fixed Cost Alloacted to Sales            2,67,556              95,556            3,63,111 Gross margin            5,16,444          1,84,444            7,00,889 Net Income under absorbtion costing East West Total Production (Units)                43,000              38,000                81,000 Sales (units)                28,000              10,000                38,000 Total Manufacturing Fixed Ohs            7,74,000 Common Expenses                56,000 Total Expenses            8,30,000 Fixed Cost Allocated to Sales            2,86,914          1,02,469            3,89,383 Admn specific fixed cost            1,70,000          1,20,000            2,90,000 Fixed Cost Allocated to Sales            1,10,698              31,579            1,42,277 Total Fixed Cost            3,97,611          1,34,048            5,31,659 Sales Value          20,16,000          7,20,000          27,36,000 Total V. Cost          12,32,000          4,40,000          16,72,000 Total Fixed Cost Alloacted to Sales            3,97,611          1,34,048            5,31,659 Net Income            3,86,389          1,45,952            5,32,341

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