Question

Chuck Wagon Grills, Inc., makes a single product—a handmade specialty barbecue grill that it sells for $210. Data for last year’s operations follow:

Units in beginning inventory		0
Units produced		9,700
Units sold		9,200
Units in ending inventory		500
Variable costs per unit:
Direct materials	$	63
Direct labor		38
Variable manufacturing overhead		12
Variable selling and administrative		19
Total variable cost per unit	$	132
Fixed costs:
Fixed manufacturing overhead	$	329,800
Fixed selling and administrative		510,000
Total fixed costs	$	839,800

Required:

1. Assume that the company uses absorption costing. Compute the unit product cost for one barbecue grill.

2. Assume that the company uses absorption costing. Prepare an income statement for last year.

Answer 1

1 (A)	Unit Product Cost	147.00
	Direct Material	63.00
	Direct Labour	38.00
	Manufacturing OH (Variable)	12.00
	Fixed Manufacturing OH (Per Unit)	34.00
	(Fixed Manufacturing OH / Units Produced)
	Total Product Cost	147.00
1 (B)	Chuck Wagon Grills
	Absorption Costing Income Statement
	Sales	1,932,000
	Less: Cost of Goods Sold	1,352,400
	Gross profit Margin	579,600
	Less: Selling and Administrative Expense	684,800
	Net Income	(105,200)