Normal 61 21 The Heart Company keeps no Work in Process Inventories. At the begi

Question

Normal 61 21 The Heart Company keeps no Work in Process Inventories. At the beginning of 2017, the company had no beginning Finished Goods inventory. For 2017, the company had budgeted production and sales of 40,000 units. This figure is also the denominator level for 2017. Actual production for 2017 is 42,000 units, and actual sales for 2017 were 39,000 units. The company purchased and used the same amount of direct materials during 2017. The actual selling price for 2017 was $45 per unit. At the end of 2017, any adjustments are closed totally to Cost of Goods Sold. Unit production costs for 2017 are as follows: Standard Cost Per Unit Actual Cost Per Unit Direct Materials Direct Labor Variable Overhead Fixed Overhead $.5.40 $12.00 $.4.50 10.50 5.60 11.90 3.85 $10.75 When using standard absorption costing, the company has the following variances in 20 Variable OH Spending Variance Variable OH Efficiency Variance Materials Price Variance$16,800 Fav. Materials Quantity Variance $25,200 unt Labor Rate Variance Labor Efficiency Variance$33,600 Fav. $14,700 Fav. $12,600 Fav $31,500 Uof $21,000 Fav $29,400 Unt Fixed OH Budget Variance Fixed OH Production Volume Var. For both normal and standard costing, overhead is charged to units on the basis of direct labor hours The standard is.75 hour per unit, but the actual labor usage was 7 hour per unit. For both fixed and variable overhead, you may assume that the predetermined overhead rates PER HOUR are the same for both normal costing and standard costing. This does NOT mean that these rates are the same PER UNIT. Actual period expenses are $210,000 fixed plus S4 per unit sold variable. You are to prepare, in good form, 6 income statements for 2017. The only heading that youneed on each statement is to designate which costing method is used. The costing methods are REQUIRED: 1. Actual absorption costing 2. Actual variable costing 3. Normal absorption costing 4. Normal variable costing 5. Standard absorption costing 6. Standard variable costing

Explanation / Answer

STD ABSORP COSTING

$

$

$

SALES 39000 UNITS

X $45

1755000

LESS COST OF SALES

PRODUCTION 42000 UNITS

1026000

CLOSING STOCK 3000 UNITS

X $25.65

(76950)

(949050)

GROSS PROFIT

805950

LESS NON PRODUC EXPENSES

(315000)

NET PROFIT

490950

WORKINGS

X $5.40

216000

X $12

360000

X $4.5

135000

X $10.50

315000

40000 UNITS

1026000

NORMAL ABSORPTION COST PER UNIT

$25.65

STD VARIABLE COSTING

$

$

$

SALES 39000 UNITS

X $45

1755000

LESS COST OF SALES

PRODUCTION 40000 UNITS

711000

CLOSING STOCK 1000 UNITS

X $17.775

(17775)

(693225)

1061775

LESS VARIABLE NON PRODUC EXPENSES

(366000)

CONTRIBUTION

695775

FIXED PROD EXPENSES 40K X .75 HOURS= 30000 HOURS

X $10.50

315000

NET PROFIT

380775

WORKINGS

X $5.40

216000

X $12

360000

X $4.50

135000

40000 UNITS

711000

VARIABLE PRODUC COST PER UNIT

$17.775

X $10.50

315000

40000 UNITS

1026000

NORMAL VARIABLE COST PER UNIT

$25.65

NORMAL VARIABLE COSTING

$

$

$

SALES 39000 UNITS

X $45

1755000

LESS COST OF SALES

PRODUCTION 42000 UNITS

746550

CLOSING STOCK 3000 UNITS

X $17.775

(53325)

(693225)

1061775

LESS VARIABLE NON PRODUC EXPENSES

(366000)

CONTRIBUTION

740625

FIXED PROD EXPENSES 42K X .75 HOURS= 31500 HOURS

X $10.50

330750

NET PROFIT

409875

WORKINGS

X $5.40

226800

X $12

378000

X $4.50

141750

42000 UNITS

746550

VARIABLE PRODUC COST PER UNIT

$17.775

X $10.50

330750

42000 UNITS

1077300

NORMAL VARIABLE COST PER UNIT

$25.65

ACTUAL VARIABLE COSTING

$

$

$

SALES 39000 UNITS

X $45

1755000

LESS COST OF SALES

PRODUCTION 42000 UNITS

698250

CLOSING STOCK 3000 UNITS

X $16.625

(49875)

(648375)

1106625

LESS VARIABLE NON PRODUC EXPENSES

(366000)

CONTRIBUTION

740625

FIXED PROD EXPENSES 42K X .7 HOURS

X $10.75

316050

FIXED NON PRODUC EXPENSES

210000

(526050)

NET PROFIT

214575

WORKINGS

X $5.60

235200

X $11.9

349860

X $3.85

113190

42000 UNITS

698250

VARIABLE PRODUC COST PER UNIT

$16.625

X $10.75

316050

42000 UNITS

1014300

ABSORPTION COST PER UNIT

$24.15

ACTUAL ABSORPTION COSTING

$

$

$

SALES 39000 UNITS

X $45

1755000

LESS COST OF SALES

PRODUCTION 42000 UNITS

1014300

CLOSING STOCK 3000 UNITS

X $24.15

(72450)

(941850)

GROSS PROFIT

813150

FIXED NON PRODUC EXPENSES

210000

VARIABLE NON PROD EXP

$4X39000

156000

(366000)

NET PROFIT

447150

WORKINGS

X $5.60

235200

X $11.9

349860

X $3.85

113190

X $10.75

316050

42000 UNITS

1014300

PER UNIT

$24.15

STD VARIABLE COSTING

$

$

$

SALES 39000 UNITS

X $45

1755000

LESS COST OF SALES

PRODUCTION 40000 UNITS

711000

CLOSING STOCK 1000 UNITS

X $17.775

(17775)

(693225)

1061775

LESS VARIABLE NON PRODUC EXPENSES

(366000)

CONTRIBUTION

695775

FIXED PROD EXPENSES 40K X .75 HOURS= 30000 HOURS

X $10.50

315000

NET PROFIT

380775

WORKINGS

X $5.40

216000

X $12

360000

X $4.50

135000

40000 UNITS

711000

VARIABLE PRODUC COST PER UNIT

$17.775

X $10.50

315000

40000 UNITS

1026000

NORMAL VARIABLE COST PER UNIT

$25.65

STD ABSORP COSTING

$

$

$

SALES 39000 UNITS

X $45

1755000

LESS COST OF SALES

PRODUCTION 42000 UNITS

1026000

CLOSING STOCK 3000 UNITS

X $25.65

(76950)

(949050)

GROSS PROFIT

805950

LESS NON PRODUC EXPENSES

(315000)

NET PROFIT

490950

WORKINGS

1. DM 40000 UNITS

X $5.40

216000

1. DL 40000 X .75= 30000 hours

X $12

360000

1. VOH 40000 X .75= 30000 HOURS

X $4.5

135000

1. FOH 40000 UNITS X .75= 30000

X $10.50

315000

40000 UNITS

1026000

NORMAL ABSORPTION COST PER UNIT

$25.65

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