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Tiny Tim's Bookcases variable full absorption costing

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Problem 2: Tiny Tim's Bookcases- Variable Costing vs Full Costing

The information for Tiny Tim's Bookcases for the first two years of its operations is as follows:

Selling price per unit $600

Variable production costs per unit produced $210

Variable selling costs per unit per unit sold $12

Fixed production costs $75,000

Fixed selling and administrative expenses $46,000

Units sold each year 1,000 units

Annual production in units:
2010 1,000 units

2011 1,250 units

Part a: Compute the unit product cost under full (absorption) costing for 2010.
Part b: Compute the unit product cost under variable costing for 2010.

Part c: Prepare a variable costing income statement for 2010. No statement heading is required.

Part d: Prepare a full (absorption) costing income statement for 2010. No statement heading is required.
Part e: Compute the unit product cost under full (absorption) costing for 2011.
Part f: Compute the unit product cost under variable costing for 2011.

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Solution Summary

Your tutorial is in Excel. I showed the unit cost for both years. I also created a traditional (gross profit subtotal) for both methods and a contribution margin format for both methods. This helps to show that you are just re-sorting the amounts and not changing the reported amounts. I created a second set of financial statements for 2011, even though you didn't ask, so you can see how they might be different when you don't sell all that you make.

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Your tutorial is in Excel. I showed the unit cost for both years. I also created a traditional (gross profit subtotal) for both methods and a contribution margin format for both methods. This helps to show ...

Solution provided by:
Carol Sargent, PhD
Education
  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
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