Question

BYD produces and sells USB sockets. The following data refer to the year just completed:

Beginning inventory      0

Units produced        42,800

Units sold                 37,500

Net operating income under variable costing is $3,300,000. Fixed manufacturing overhead incurred for the above production process totaled$141,240.

Required:

1, Compute the units which make the difference. and 2. the manufacturing cost per unit which make the difference.

3. Use vertical 3 rows schedule to explain the variances between the absorption costing and variable cost operating income figures.

Answer 1

Answer 1.

Number of units produced = 42,800
Number of units sold = 37,500

Number of units in ending inventory = Number of units produced - Number of units sold
Number of units in ending inventory = 42,800 - 37,500
Number of units in ending inventory = 5,300

Answer 2.

Fixed manufacturing overhead = $141,240

Fixed manufacturing overhead per unit = Fixed manufacturing overhead / Number of units produced
Fixed manufacturing overhead per unit = $141,240 / 42,800
Fixed manufacturing overhead per unit = $3.30

Answer 3.