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Variable / Absorption costing - income statement

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Chuck Wagon Grills, Inc., makes a single product - a handmade specialty barbecue grill that it sells for $210. Data for last year's operations follow:

Units in beginning inventory 0
units produced 20,000
units sold 19,000
units in ending inventory 1,000

Variable costs per unit:
Direct materials $50
Direct Labor 80
Variable manufacturing overhead 20
Variable selling and admin. 10

Total variable cost per unit $160

Fixed Costs:
Fixed Manufacturing Overhead $700,000
Fixed Selling and Admin. 285,000

Total Fixed Costs $985,000

1. Assume the company uses variable costing. Compute the unit product cost for one barbecue grill.
2. Assume the company uses variable costing. Prepare a contribution format income statement for the year.
3. What is the company's break-even point in terms of of the number of barbecue grills sold?

Refer to the data above. Assume absorption costing is used:
1. Compute the product cost for one barbecue grill.
2. Prepare an income statement.

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Chuck Wagon Grills, Inc., makes a single product - a handmade specialty barbecue grill that it sells for $210. Data for last year's operations follow:

Units in beginning inventory 0
units produced 20,000
units sold 19,000
units in ending inventory 1,000

Variable costs per unit:
Direct materials $50
Direct Labor 80
Variable manufacturing overhead 20
Variable selling and admin. 10

Total variable cost per unit $160

Fixed Costs:
Fixed Manufacturing Overhead $700,000
Fixed Selling and Admin. 285,000

Total Fixed Costs ...

Solution Summary

The solution explains how to determine the unit cost and prepare income statement using variable/absorption costing

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See Also This Related BrainMass Solution

Preparing Variable and Absorption Costing Income Statements

Please see attached file WEEK 8 for the problem, also use attached file P6-21A for your solution.
Preparing variable and absorption costing income statements, and identifying pros and cons
Mp3 Musico Co. manufactures mp3 players. The company had beginning inventory of 1,000 mp3 players. These players had $30 each in variable costs per player and $2 each in fixed manufacturing costs per player. The following data are from the company's production records for two months of 2011:

June 2011 July 2011
Direct materials cost per mp3 player $5.00 $5.00
Direct labor cost per mp3 player $14.00 $14.00
Variable manufacturing overhead cost per mp3 player $10.00 $10.00
Total fixed manufacturing overhead costs $70,000 $70,000
Total fixed selling and administrative costs $20,000 $20,000
Number of mp3 players produced 35,000 40,000
Number of mp3 players sold 34,800 40,300
Sale price per mp3 player $40 $40

Requirements
1. Assuming the FIFO cost flow, compute the product cost mp3 player produced under absorption costing and under variable costing
2. Prepare a monthly income statement for June and July, using: A. absorption costing. B. Variable costing.
3. Is operating income higher under absorption costing or variable costing in June? In July? Give two reasons why and explain the pattern of differences in operating income based on absorption costing versus variable costing.

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