Question

Cost of Goods Manufactured, using Variable Costing and Absorption Costing On March 31, the end of the first year of operations, Barnard Inc., manufactured 4,100 units and sold 3,500 units. The following income statement was prepared, based on the variable costing concept: Barnard Inc. Variable Costing Income Statement For the Year Ended March 31, 20Y1 Sales $1,085,000 Variable cost of goods sold: Variable cost of goods manufactured $610,900 Inventory, March 31 (89,400) Total variable cost of goods sold (521,500) Manufacturing margin $563,500 Total variable selling and administrative expenses (129,500) Contribution margin $434,000 Fixed costs: Fixed manufacturing costs $278,800 Fixed selling and administrative expenses 87,500 Total fixed costs (366,300) Operating income $67,700 Determine the unit cost of goods manufactured, based on (a) the variable costing concept and (b) the absorption costing concept. Variable costing $ Absorption costing $

Answer 1

Answer:

a.  $149.00

b.  $217.00

Explanation:

Variable Costing

Product Cost under Variable Costing = Variable Manufacturing Costs Only

Total Variable Manufacturing Cost = $610,900

Unit Cost = Total Cost / Units Manufactured

                = $610,900 / 4,100 units

                = $149.00

Variable Costing

Product Cost under Absorption Costing = Variable Manufacturing Costs + Fixed Manufacturing Costs.

Total Absorption Cost Calculation

Total Variable Manufacturing Cost  $610,900

Fixed manufacturing costs               $278,800

Total Absorption Cost                      $889,700

Unit Cost = Total Cost / Units Manufactured

                = $889,700 / 4,100 units

                = $217.00