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HJ Turner Corporation

HJ Turner Corporation produces a single product. Data concerning the company's operations last year appear below:

Units in beginning inventory.........................
0

Units produced..............................................
10,000

Units sold.......................................................
9,000

Selling price per unit......................................
$60

Variable costs per unit:

Direct materials...........................................
$15

Direct labor.................................................
$5

Variable manufacturing overhead...............
$2

Variable selling and administrative.............
$4

Fixed costs in total:

Fixed manufacturing overhead...................
$200,000

Fixed selling and administrative.................
$70,000

Assume direct labor is a variable cost.

Required:

a. Compute the unit product cost under both absorption and variable costing.

b. Prepare an income statement for the year using absorption costing.

c. Prepare an income statement for the year using variable costing.

d. Prepare a report reconciling the difference in net operating income between absorption and variable costing for the year.

Solution Preview

HJ Turner Corporation produces a single product. Data concerning the company's operations last year appear below:

Units in beginning inventory......................... 0
Units produced.............................................. 10,000
Units sold....................................................... 9,000

Selling price per unit...................................... $60

Variable costs per unit:

Direct materials........................................... $15

Direct labor................................................. $5

Variable manufacturing overhead............... $2

Variable selling and administrative............. $4

Fixed costs in total:

Fixed manufacturing overhead................... $200,000

Fixed selling and administrative................. $70,000
Assume direct labor is a variable cost.
Required:

a. ...

Solution Summary

This solution is comprised of a detailed explanation and calculation to compute the unit product cost under both absorption and variable costing, preparing an income statement for the year using absorption & variable costing, and preparing a report reconciling the difference in net operating income between absorption and variable costing for the year.

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