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Variable and Full Costing Income:Comprehensive Problem

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The
following information relates to Jorgensen Manufacturing for calendar year 2011, the company's
first year of operation:

Units produced 8,000
Units sold 7,000
Selling price per unit $ 4,500
Direct material per unit $ 2,000
Direct labor per unit $ 1,200
Variable manufacturing overhead per unit $ 900
Variable selling cost per unit $ 225
Annual fixed manufacturing overhead $800,000
Annual fixed selling and administrative expense $400,000

Required

a. Prepare an income statement using full costing.

b. Prepare an income statement using variable costing.

c. Calculate the amount of fixed manufacturing overhead that will be included in ending inventory under full costing and reconcile it to the difference between income computed under variable and full costing.

d. Suppose that the company sold 8,000 units during the year.What would the variable costing net income have been? What would the full costing net income have been?

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Solution Preview

Dear student,
Solution is provided in a separate excel file attached.It contains following parts.

1 Data used in the problem

2 Statement of unit cost analysis under Variable and absorption costing.

3 Income statement under Absorption costing

4 Income statement under Variable costing

5 Note: (1) Absorption costing treats all costs of production as manufacturing costs regardless of their ...

Solution Summary

Variable and full costing income for comprehensive problems are examined.

$2.19
See Also This Related BrainMass Solution

Summit Manufacturing analysis of variable costing; Porter Manufacturing cost methods.

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
Variable manufacturing overhead $2.00
Total variable manufacturing costs per unit $9.00

Fixed manufacturing overhead per year $168,000
"In addition, the company has fixed selling and
administrative costs per year:" $152,000

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?

Fixed Manufacturing Overhead Amount
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 manufacturing overhead per unit
Variable selling cost per dollar of sales
Annual fixed manufacturing overhead
Annual fixed selling expense
Annual fixed administrative expense
Units produced
Units sold

Required
a. Prepare an income statement using full costing.

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