Exercise 7 6& 7 9

EXERCISE 7-6

Compute the unit product cost for one computer desk, using absorption costing.

Direct material

$ 50

Direct labor

$ 80

Variable MOH

$ 20

Total vc. MOH cost

$150

Fix.MOH(700,000/20000)

$ 35

Unit product cost

$ 185

income statement for year RM sales (19,000 x $ 210)

RM 3990,000

cost of goods sold : beginning inventory

0

add cost of goods manufacturing (20,000 x $185)

3700,000

goods available for sale

3700,000

(-) ending inventory (1000 x $ 185)

(185,000)

Cost of goods sold

3515,000

Gross margin

475,000

Selling & administrative exp.(19,000 x $10 + 285,000)

475,000

Net operating income

EXERCISE 7-9

0

Unit product cost using variable costing Direct material

$5

Direct labor

$6

Variable MOH

$1

Unit product cost

$ 12

Income statement for year RM Sales (35,000 x $25)

RM 875,000

Variable exp: Variable COGS: Beginning inventory

0

Add variable MOH cost (40,000 x $12)

480,000

Goods available for sale

480,000

(-) ending inventory (5000 x $12)

60,000

Variable COGS

420,000

Variable selling & administrative (35,000 x $2)

70,000

Contribution margin

490,000 385,000

Fixed exp: Fixed MOH

160,000

Fixed selling&administrative

210,000

Net operating income

370,000 15,000

The reconciliation of the variable and absorption costing net operating income follows :

Variable costing net operating income

$ 15,000

Add fixed MOH cost deferred in inventory under absorption Costing (5000 x $ 4)

$ 20,000

Absorption costing net operating income

$ 35,000