Question

Advanced Company reports the following information for the current year. All beginning inventory amounts equaled $0 this year.

Units produced this year		40,000	units
Units sold this year		24,000	units
Direct materials	$	24	per unit
Direct labor	$	26	per unit
Variable overhead	$	120,000	in total
Fixed overhead	$	200,000	in total

1.

Given Advanced Company's data, compute cost of finished goods in inventory under variable costing.

Multiple Choice

• 
  
  $928,000
• 
  
  $2,320,000
• 
  
  $1,392,000
• 
  
  $848,000
• 
  
  $1,272,000

2.Brush Industries reports the following information for May:

Sales	$	930,000
Fixed cost of goods sold		106,000
Variable cost of goods sold		256,000
Fixed selling and administrative costs		106,000
Variable selling and administrative costs		131,000

Calculate the operating income for May under absorption costing.

Calculate the gross margin for May under absorption costing.

Multiple Choice

• 
  
  $698,000
• 
  
  $361,000
• 
  
  $585,000
• 
  
  $586,000

3.

Red and White Company reported the following monthly data:

Units produced		2,700	units
Sales price	$	32	per unit
Direct materials	$	2	per unit
Direct labor	$	3	per unit
Variable overhead	$	4	per unit
Fixed overhead	$	8,640	in total

Part 1.What is Red and White's net income under absorption costing if 1,050 units are sold and selling and administrative expenses are $17,000?

part 2. What is Red and White's net income under variable costing if 1,050 units are sold and operating expenses are $17,000?

Answer 1

Advanced company
( 40000 - 24000 ) units * product cost ( 24 + 26 + 3 ) = $ 848000
Option D is correct.
VOH cost p.u = 120000 / 40000 = $ 3
Brush industries
Sales	930000
Less:- COGS ( 106000 + 256000 )	362000
GP	568000
Less:- Selling and adm. Exp. ( 106000 + 131000 )	237000
NOI	331000
Red and white company
Sales ( 1050 * 32 )	33600
Less:- Variable COGS ( 1050 * [ 2 + 3 + 4 ])	-9450
Less:- FOH ( 8640 / 2700 ) * 1050	-3360
GP	20790
Less:- Selling and adm. Exp.	17000
NOI	3790
Variable costing
Sales ( 1050 * 32 )	33600
Less:- Variable COGS ( 1050 * [ 2 + 3 + 4 ])	-9450
Less:- operating exp.	-17000
CM	7150
Less:- FC	-8640
NOI	-1490