Explore BrainMass
Share

Managerial Accounting:Absorption costing VS variable costing

This content was STOLEN from BrainMass.com - View the original, and get the already-completed solution here!

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

19. What is the unit product cost for the month under variable costing?
A) $80
B) $119
C) $113
D) $86

20. What is the unit product cost for the month under absorption costing?
A) $86
B) $119
C) $113
D) $80

21. The total contribution margin for the month under the variable costing approach is:
A) $66,700
B) $128,800
C) $46,300
D) $142,600

22. The total gross margin for the month under the absorption costing approach is:
A) $11,500
B) $66,700
C) $89,300
D) $128,800

23. What is the net operating income for the month under variable costing?
A) $4,900
B) $11,500
C) $6,600
D) ($11,100)

24. What is the net operating income for the month under absorption costing?
A) ($11,100)
B) $11,500
C) $6,600
D) $4,900

© BrainMass Inc. brainmass.com October 16, 2018, 6:45 pm ad1c9bdddf
https://brainmass.com/business/accounting/managerial-accounting-absorption-costing-vs-variable-costing-94002

Attachments

Solution Summary

Solution contains calculations of contribution margin ,cost per unit and net operating income under absorption costing and variable costing.

$2.19
Similar Posting

Managerial Accounting (Absorption Costing & Variable Costing)

Whitman Company has just completed its first year of operations. The company's absorption costing income statement for the year appears below:

Please see the attachment for better layout.

Whitman Company
Income Statement
Sales (39,000 units Ã? $44.6 per unit) $1,739,400
Cost of goods sold (39,000 units Ã? $21 per unit)

819,000
Gross margin 920,400
Selling and administrative expenses

448,500
Net operating income

$471,900

The company's selling and administrative expenses consist of $292,500 per year in fixed expenses and $4 per unit sold in variable expenses. The $21 per unit product cost given above is computed as follows:

Direct materials $9
Direct labor 3
Variable manufacturing overhead 3
Fixed manufacturing overhead ($306,000 ÷ 51,000 units)

6
Absorption costing unit product cost

$21

Requirement 1:

Redo the company's income statement in the contribution format using variable costing. (Input all amounts as positive values.

Requirement 2:

Reconcile any difference between the net operating income on your variable costing income statement and the net operating income on the absorption costing income statement above.

View Full Posting Details