Bracey Company manufactures and sells one product. The following information per

Question

Bracey Company manufactures and sells one product. The following information pertains to the company's first year of operations Variable cost per unit: Direct materials 36 Fixed costs per year: Direct labor Fixed manufacturing overhead Fixed selling and administrative expenses 541,500 475,950 $ 82,000 The company does not incur any variable manufacturing overhead costs or variable selling and administrative expenses. During its first year of operations, Bracey produced 28,500 units and sold 25,900 units. The selling price of the company's product is $79 per unit. Requirec 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 $19.00 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. Assume the company uses an absorption costing system that assigns $19.00 of direct labor cost and $16.70 of fixed manufacturing overhead cost to each unit produced a. Compute the unit product cost for the year b. Prepare an income statement for the year. 4a. Reconcile the difference between the super-variable costing and variable costing net operating incomes 4b. Reconcile the difference between the super-variable costing and absorption costing net operating incomes

Explanation / Answer

1. a. unit product cost = $36 (direct material)

   Note:- In super variable costing method , only direct material is considered for unit product cost

      b. Super variable income statement   

2.    a. unit product cost = Direct material $36 + Direct labor $19

= $55

Note:-   Direct labour per unit produced = $541500 / 28500 units

   = $19 per unit

b. variable income statement   

3.    a. unit product cost = Direct material $36 + Direct labor $19 + Fixed manufacturing overhead $16.7

   = $71.7

  Note:- Fixed manufacturing overhead per unit produced = $475950 / 28500 units

= $16.7

b. Absorption costing income statement

4. a Super-variable costing net operating income = $14250

Add: Direct labor deferred in inventory [(28500-25900) * $19] = $49400

variable costing net operating income   = $63650

b Super-variable costing net operating income = $14250

Add: Fixed manufacturing overhead [(28500-25900) * $16.7] = $43420

Add:Direct labor deferred in inventory [(28500-25900) * $19] = $49400

Absorption costing net operating income = $107070

sales (25900 * $79) 2046100 less: variable cost of goods sold (25900 * $36) 932400 Contribution margin 1113700 less: Fixed expenese Direct labor 541500 Fixed manufacturing overhead 475950 Fixed selling and administrative expense 82000 Net operating income $14250

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