Question

Beginning inventory 0

Answer 1

Answer:

a) The unit product cost under absorption costing is $51.

b) Income Statement for May:

Sales Revenue           $3,564,000

Cost of goods sold      2,244,000

Gross profit                $1,320,000

Selling and admin.

expenses                      650,000

Net operating income $670,000

Explanation:

a) Data and Calculations:

Beginning inventory 0

Units produced  49,000

Units sold           44,000

Ending inventory 5,000

Selling price per unit $81

Selling and administrative expenses:

Variable per unit $2

Fixed (total) $562,000

Manufacturing costs:

Direct materials cost per unit $18

Direct labor cost per unit         $9

Variable manufacturing

 overhead cost per unit          $4

Total direct costs per unit     $31

Fixed manufacturing overhead cost (total) $980,000

Unit product cost under absorption costing:

Manufacturing costs:

Direct materials cost per unit $18

Direct labor cost per unit         $9

Variable manufacturing

 overhead cost per unit          $4

Total direct costs per unit     $31

Fixed manufacturing

overhead cost (total)           $20 ($980,000/49,000)

Total unit product cost =      $51

Cost of goods manufactured = $2,499,000 ($51 * 49,000)

Cost of goods sold = $2,244,000 ($51 * 44,000)

Selling and administrative expenses = $650,000 ($2 * 44,000 + 562,000)