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Variable costing and absorption costing

Provide appropriate supporting analysis for your answer choice.

Abbey 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 0
Units produced 6,300
Units sold 6,100
Units in ending inventory 200

Variable costs per unit:
Direct materials $32
Direct labor $50
Variable manufacturing overhead $5
Variable selling and administrative $11

Fixed costs:
Fixed manufacturing overhead $88,200
Fixed selling and administrative $97,600

1. What is the unit product cost for the month under variable costing?
A) $87
B) $101
C) $112
D) $98

2. What is the unit product cost for the month under absorption costing?
A) $101
B) $98
C) $87
D) $112

3. The total gross margin for the month under the absorption costing approach is:
A) $189,100
B) $6,100
C) $170,800
D) $191,000

4. What is the total period cost for the month under the variable costing approach?
A) $252,900
B) $164,700
C) $88,200
D) $185,800

5. What is the net operating income for the month under variable costing?
A) $3,300
B) $2,800
C) ($14,100)
D) $6,100

Solution Summary

The solution examines variable costing and absorption costing.

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