XYZ Corp. manufactures Product X. The following data conserncosts for 2016: tota
ID: 2601402 • Letter: X
Question
XYZ Corp. manufactures Product X. The following data conserncosts for 2016:
total cost # of units produced unit cost
Manufact. costs:
Variable 375,000 15,000 25
Fixed 150,000 15,000 10
Total 525,000 35
Selling and admin. Exp.
Variable (5$ per unit sold) 60,000
Fixed 40,000
Total 100,000
Product X sells for $60 per unit. No begining inventory.
a) Prepare an absorption costing income statment assuming that 12000units were sold.
b) Prepare a Variable costing income statmentassuming tha 12000 units were sold.
c) Explainethe difference between the two income statment.
Explanation / Answer
a. calculation of total cost per unit.
Income Statement under absorption costing
b. Income statement under variable costing
c.. Under absorption costing fixed manufacturing expenses are allocated to the cost of manufacturing per unit and therefore, the fixed manufacturing expense allocated to the units not sold are not charged in the period in which they occur rather they are expensed out in the period in which they are sold. However, in variable costing all the fixed expenses incurred are charged in the year of production only. As a result there the operating income show under absroption costing is more than the operating income shown under variable costing.
Particulars Amount Variable Manufacturing Cost 375,000 Fixed Manufacturing Cost 150,000 Total Cost of manufacturing 525,000 Total Units produced 15,000 per unit cost 35Related Questions
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