Answer:
a:<u>Total Variable Costs $26 </u>
a:<u>Total Manufacturing Costs = $ 30</u>
b:<u>Net Income </u><u><em>Variable Costing</em></u><u> $100,000</u>
b: <u>Net Income </u><u><em>Absorption Costing</em></u><u> $ 100,000</u>
Explanation:
Smuckers Manufacturers
<u>Costs per case under Variable Costing</u>
Direct materials per case 16
Direct labor per case 7
Variable manufacturing overhead per case 3
<u>Total Variable Costs $26 </u>
<u>Costs per case under Absorption Costing</u>
Direct materials (30,000*16) 480,000
Direct labor (30,000*7) 210,000
Variable manufacturing overhead (30,000*3) 90,000
Total Variable Costs 780,000
Total fixed manufacturing overhead $120,000
Total Manufacturing Costs $ 900,000
<u>Total Manufacturing Costs per Case= $ 900,000/ 30,000= $ 30</u>
The difference between the variable and absorption costing is that the product costs include variable and fixed costs in absorption costing. But in variable costing the product costs include only variable costs.
<u><em> SMUCKERS </em></u>
<u><em>Variable Costing Income Statement </em></u>
<u><em>For the Third Quarter of 2017 </em></u>
<u><em></em></u>
Sales (30,000*34) 1020,000
Direct materials (30,000*16) 480,000
Direct labor (30,000*7) 210,000
Variable manufacturing overhead (30,000*3) 90,000
Total Variable Costs 780,000
Contribution Margin 240,000
Fixed Expenses 140,000
Total fixed manufacturing overhead $120,000
Fixed selling and administrative 20,000
<u>Net Income 100,000</u>
In this case the net income under both variable and absorption costing does not change because the units produced are units sold. No cost is charged to ending inventory under absorption costing.
<u><em>SMUCKERS </em></u>
<u><em>Absorption Costing Income Statement </em></u>
<u><em>For the Third Quarter of 2017 </em></u>
Sales (30,000*34) 1020,000
Direct materials (30,000*16) 480,000
Direct labor (30,000*7) 210,000
Variable manufacturing overhead (30,000*3) 90,000
Total fixed manufacturing overhead $120,000
Total Manufacturing Costs 900,000
Gross Profit 120,000
Fixed Expenses 20,000
Fixed selling and administrative 20,000
<u>Net Income 100,000</u>
