Question

On December 31, the end of the first year of operations, Frankenreiter Inc., manufactured 2,700 units and sold 2,300 units. The following income statement was prepared, based on the variable costing concept: Frankenreiter Inc. Variable Costing Income Statement For the Year Ended December 31, 20Y1 Sales $805,000 Variable cost of goods sold: Variable cost of goods manufactured $453,600 Inventory, December 31 (67,200) Total variable cost of goods sold 386,400 Manufacturing margin $418,600 Total variable selling and administrative expenses 96,600 Contribution margin $322,000 Fixed costs: Fixed manufacturing costs $207,900 Fixed selling and administrative expenses 64,400 Total fixed costs 272,300 Income from operations $49,700 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

Requirement (a)

Cost per unit as per Variable costing
	Total (A)	Units sold (B)	Per unit cost (C=A/B)
Variable cost of goods manufactured	$    4,53,600.00	2300	$      197.22

Requirement (b)

Cost per unit as per Absorption costing
	Total (A)	Units (B)	Per unit cost (C=A/B)
Variable cost of goods manufactured	$    4,53,600.00	2300	$      197.22
Fixed manufacturing Overheads	$    2,07,900.00	2700	$         77.00
Total Manufacturing cost per unit			$      274.22