Marginal Cost
Regression questions
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Solution Summary
Marginal Costs are determined.
Variable costing
Avant Designs and manufactures polished-nickle fashion bracelets. It offers two bracelets: Aztec
and Mayan. The following data summarized budgeted operations for the current year:
AVANT DESIGNS
Summary of Budgeted Operations
Current Year
Aztec Mayan
Sales price/unit $12 $15
Variable cost/unit $4 $5
Units sold 30,000 20,000
Machine minutes/units 2 3
Beginning inventory 0 0
Ending inventory 3,000 1,000
Budgeted fixed manufacturing overhead for the year was $258,000.
Required:
a. Prepare the budgeted income statement for the year using variable costing.
P 10-14: Solution to Avant Designs
[Variable vs. absorption costing with two products]
a. The budgeted variable costing income statement:
Avant Designs
Budgeted Income Statement - Variable Costing
Current Year
Aztec Mayan Total
Sales price $12 $15
Variable cost $4 $5
Contribution margin
Units sold 30,000 20,000
Net Margin
Budgeted fixed
manufacturing overhead
Net Income
b. Avant Designs
Calculation of Budgeted Machine Minutes
Current Year
Total
Change in Inventory Units Sold Units Produced Machine Minutes/unit Machine Minutes
Aztec
Mayan
Budgeted machine minutes
Fixed manufacturing overhead rate =
The next step is calculating the fully absorbed cost of manufacturing each bracelet.
Avant Designs
Calculation of Fully Absorbed Cost per Bracelet
Current Year
Fixed Manufacturing
Variable Cost Mathine Minutes/Units Overhead Rate/Machine Minutes Overhead per Bracelet Fully Absorbed Cost Per Bracelet
Aztec
Mayan
Avant Designs
Budgeted Income Statement - Absorption Costing
Current Year
Aztec Mayan Total
Sales Price
Absorption Cost
Net margin per bracelet
Units sold
Net Margin
Net Income
c. Avant Designs
Reconciliation of Net Incomes Computed Using Absorption and Variable Costing
Current Year
Change in Inventory Machine Minutes per Bracelet Machine Minutes in Inventory
Aztec
Mayan
Total machine minutes in inventory
Fixed manufacturing overhead rate per machine minute
Total fixed manufacturing overhead in inventory
Avant Designs
Reconciliation of Net Incomes Computed Using Absorption and Variable Costing
Current Year
Ending Inventory Variable Cost Per Bracelet Ending Inventory Value
Aztec
Mayan
Ending Inventory (Variable Costing)
Ending Inventory Full Absorption Cost per Bracelet Ending Inventory Value
Aztec
Mayan
Ending Invenroty (Obsorption Costing)
Difference in Inventory Values
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