Question

The Atalia Corp. sells bicycle helmets for $56 each. The variable manufacturing costs per unit total $20 per unit (direct material, direct labor and manufacturing overhead). The total fixed manufacturing overhead is $15,000. For selling and administrative costs, variable S&A is $1 per unit and fixed S&A is $25,000. Atalia produced 5,000 units and sold 4,000 units.

The absorption costing NOI is _________, and the variable costing NOI is _________

Answer 1

Income Statement

Absorption Costing

Sales($56*4000 units)	$224,000
Less: Cost of Good Sold ($23#1*4000 units)	$92,000
Gross Profit	$132,000
Less:Variable selling & Adm. Expenses ($1*4000 units)	$4000
Less:Fixed selling & Adm.Expenses	$25,000
Net Operating Income (NOI)	$103,000

#1 Product Cost per unit= Variable Manufacturing Cost per unit + Fixed manufacturing overhead per unit

= $20 + ($15,000/5000 units)

=$20 + $3

=$23

Income statement

Variable Costing Income Statement

Sales($56 * 4000)	$224,000
Less: Variable Cost of Good Sold ($21#2 * 4000 units )	$84,000
Contribution margin	$140,000
Less:Fixed Manufacturing overhead	$15000
Less:Fixed Selling & Adm. Expenses	$25,000
Net Operating Income (NOI)	$100,000

#2Total Variable Cost Per unit= Variable Manufacturing Cost per unit + Variable Sell.&Adm.Expenses

=$20+$1

=$21