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# Absorption / variable costing

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See attached Excel file.

Exercise E5: 11-18 General Information
Summit Manufacturing, Inc. produces snow shovels. The selling price per snow shovel is \$25

Costs involved in production are:
Direct materials \$4.00
Direct labor \$3.00
Total variable manufacturing costs per unit \$9.00

Fixed manufacturing overhead per year \$168,000
"In addition, the company has fixed selling and

Exercise E5-11 During the year, Summit produces 42,000 snow shovels and sells
38,500 snow shovels. What is the value of ending inventory using full costing?

Title Number
Fixed Manufacturing Overhead per unit Formula

Direct Materials per unit Amount
Title Amount
Title Amount
Title Amount
Cost per unit Formula

Shovels produced Number
Title Number
Title Formula
X ??? Amount
Value of ending inventory using full costing: Formula

Exercise E5-12 During the year, Summit produces 42,000 snow shovels and sells
38,500 snow shovels. What is the value of ending inventory using variable costing?

Direct Materials per unit Amount
Title Amount
Title Amount
Cost per unit Formula

Shovels produced Number
Title Number
Title Formula
X ??? Amount
Value of ending inventory under variable costing: Formula

Exercise E5-13 During the year, Summit produces 42,000 snow shovels and sells
38,500 snow shovels. Calculate the difference in full costing net income and variable costing net income
without preparing either income statement.

Shovels produced Number
Title Number
Title Formula
X ??? Amount
Difference in net income: Formula

Exercise E5-14 During the year, Summit produces 42,000 snow shovels and sells
38,500 snow shovels. What is the cost of goods sold using full costing?

Title Amount
Divided by ??? Number
Fixed Manufacturing Overhead per unit Formula

Direct Materials per unit Amount
Title Amount
Title Amount
Title Amount
Cost per unit Formula

Title Number
X ??? Amount
Cost of goods sold using full costing: Formula

Exercise E5-15 During the year, Summit produces 42,000 snow shovels and sells
38,500 snow shovels. What is the variable cost of goods sold?

Title Amount
Title Amount
Title Amount
Cost per unit Formula

Title Number
Title Amount
Variable cost of goods sold: Formula

Exercise E5-16 During the year, Summit produces 42,000 snow shovels and sells
38,500 snow shovels. What is net income using full costing?
The following information relates to Porter Manufacturing for fiscal 2008, the company's
first year of operation:

Selling price per unit
Direct material per unit
Direct labor per unit
Variable selling cost per dollar of sales
Annual fixed selling expense
Units produced
Units sold

Required
a. Prepare an income statement using full costing.

#### Solution Summary

The solution explains two questions relating to absorption and variable costing

\$2.19

## Accounting Questions

See attached file for full problem description.

Question 2

Jay Manufacturing's sales slumped badly in 2006 due to so many people purchasing gifts online. The company's income statement showed the following results from selling 500,000 units of product: Net sales, \$2,000,000; total costs and expenses, \$2,500,000; and net loss of \$500,000. Costs and expenses consisted of the following:

Total Variable Fixed
Cost of goods sold \$2,000,000 \$1,300,000 \$700,000
Selling expenses 200,000 50,000 150,000
\$2,500,000 \$1,500,000 \$1,000,000

Management is considering the following alternative for 2007:
Purchase new automated equipment that will change the proportion between variable and fixed costs to 40% variable and 60% fixed.

Instructions
A. Determine the selling price per unit.
B. Compute the break-even point in dollars for 2006.
C. Compute the break-even point in dollars under the alternative course of action for 2007.

Question 3

Fresh Air Products manufactures and sells a variety of camping products. Recently the company opened a new plant to manufacture a deluxe portable cooking unit. Cost and sales data for the first month of operations are shown below:

Manufacturing Costs
Variable overhead \$ 3 per unit
Direct labor \$ 12 per unit
Direct material \$ 30 per unit

Beginning inventory 0 units
Units produced 12,000
Units sold 10,000