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Variable and Absorption Costing

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CompuDesk, Inc., makes an oak desk specially designed for personal computers. The desk sells for $195. Data for last year's operations follow:

Units in beginning inventory 0
Units produced 9,900
Units sold 8,000
Units in ending inventory 1,900
Variable costs per unit:
Direct materials $ 61
Direct labor 32
Variable manufacturing overhead 11
Variable selling and administrative 22
Total variable cost per unit $ 126
Fixed costs
Fixed manufacturing overhead $ 315,000
Fixed selling and administrative 515,000
Total fixed costs $ 830,000

Requirement 1:
Assume that the company uses variable costing. Compute the unit product cost for one computer desk.

Unit product cost = $___________________

Requirement 2:
Assume that the company uses variable costing. Prepare a contribution format income statement for the year.
(Fill in grey area)
Sales $
Variable expenses:
Variable Cost of goods sold:
Beginning inventory $
Add: Variable manufacturing costs
Goods available for sale
Less: Ending inventory
Variable cost of goods sold
Variable selling and administrative
Fixed expenses:
Fixed manufacturing overhead
Fixed selling and administrative
Net operating loss $

Requirement 3:
What is the company's break-even point in terms of units sold?

Break-even point = _________________ units.

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Solution Summary

The solution explains some calculations relating to variable and absorption costing

See Also This Related BrainMass Solution

Emerson Corporation: Throughput costing, absorption costing and variable costing

Emerson Corporation which uses throughput costing just completed its first year of operations. Planned and actual production equaled 10,000 units and sales total 9600 units at $72 per unit. Costs data for the year are as follows:

Direct material per unit $12.00
Conversion Costs
Direct Labor $45,000
Variable manufacturing overhead $65,000
Fixed manufacturing overhead $220,000
Selling and administrative costs
Variable per unit $8.00
Fixed $118,000

The company classifies only direct material as a throughput cost.

1. Compute the company's total cost for the year assuming that variable manufacturing costs are driven by the number of units produced and variable selling and administrative costs are driven by the number of units sold.

2. How much of this cost would be held in year-end inventory under (a) absorption costing (b) variable costing and (c) throughput costing.

3. How much of the company's total cost for the year would be included as an expense on the period's income statement under (a) absorption costing (b) variable costing and (c) throughput costing.

4. Prepare Emerson's throughput costing income statement.

5. Show the solution if the following information was changed: direct material cost is $11.00 per unit and the total direct labor cost is $46,000.

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