Question

Brislin Gifts makes ceramic mugs and has the following amounts during 2020 (Assume the same unit...

Brislin Gifts makes ceramic mugs and has the following amounts during 2020 (Assume the same unit costs in all years): Selling price $9.00 per mug Variable production cost $2.50 per mug Variable selling cost $1.10 per mug Fixed production cost $100,000 per month Fixed selling and administrative cost $60,000 per month Production and sales in units for the first three months of 2020 are as follows: Year Production Sales January 50,000 44,000 February 40,000 45,000 March 50,000 45,000 Inventory at January 1, 2020 consisted of 1,000 mugs. Which two months would have the same net income under full costing?

January and February

February and March

January and March

No, two months would have the same net income.

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Answer #1

Ans: Option ( D) No, two months would have the same net income.

Explanation:

1) Unit Cost:

Jan Feb Mar
Sales P.U( a) $9 $9 $9
Less:
Variable Manufa. OH $2.50 $2.50 $2.50
Fixed Manufa. OH( 100,000/50,000); ( $100,000/40,000);( $100,000/50,000) $2 $2.50 $2
Total Cost ( b) $4.5 $5 $4.5
Contribution Margin Per Unit ( a - b) $4.5 $4 $4.5
Multiply By : Sales 44,000 45,000 45000
Total Contribution Margin $198,000 $180,000 $202,500

2) So, as we can see no two months have same contribution margin, therefore we can conclude no two months havdm same net income.

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