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# Absorption Cost and Variable Cost

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Jarbee Company, which has only one product, has provided the following data concerning its most recent month of operations:

Selling price \$129

Units in beginning inventory 500
Units produced 3,600
Units sold 3,800
Units in ending inventory 300

Variable costs per unit:
Direct materials \$13
Direct labor \$59

Fixed costs:

The company produces the same number of units every month, and the sales in units vary from month to month. The company's variable costs per unit and total fixed costs have been constant from month to month.

1. What is the unit product cost for the month under variable costing?
(show work)

2. What is the unit product cost for the month under absorption costing?
(show work)

3. What is the net operating income for the month under variable costing?

Solution (show work):

4. What is the net operating income for the month under absorption costing?

Solution (show work):

#### Solution Summary

The solution explains various calculations pertaining to absorption cost and variable cost

\$2.19
Similar Posting

## Emerson Corporation: Throughput costing, absorption costing and variable costing

Emerson Corporation which uses throughput costing just completed its first year of operations. Planned and actual production equaled 10,000 units and sales total 9600 units at \$72 per unit. Costs data for the year are as follows:

Direct material per unit \$12.00
Conversion Costs
Direct Labor \$45,000
Variable per unit \$8.00
Fixed \$118,000

The company classifies only direct material as a throughput cost.

1. Compute the company's total cost for the year assuming that variable manufacturing costs are driven by the number of units produced and variable selling and administrative costs are driven by the number of units sold.

2. How much of this cost would be held in year-end inventory under (a) absorption costing (b) variable costing and (c) throughput costing.

3. How much of the company's total cost for the year would be included as an expense on the period's income statement under (a) absorption costing (b) variable costing and (c) throughput costing.

4. Prepare Emerson's throughput costing income statement.

5. Show the solution if the following information was changed: direct material cost is \$11.00 per unit and the total direct labor cost is \$46,000.

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