Question

Cost of Goods Manufactured, using Variable Costing and Absorption Costing

On March 31, the end of the first year of operations, Barnard Inc., manufactured 3,900 units and sold 3,400 units. The following income statement was prepared, based on the variable costing concept:

Barnard Inc. Variable Costing Income Statement For the Year Ended March 31, 20Y1
Sales			$680,000
Variable cost of goods sold:
Variable cost of goods manufactured	$374,400
Inventory, March 31	(48,000)
Total variable cost of goods sold			(326,400)
Manufacturing margin			$353,600
Total variable selling and administrative expenses			(81,600)
Contribution margin			$272,000
Fixed costs:
Fixed manufacturing costs	$171,600
Fixed selling and administrative expenses	54,400
Total fixed costs			(226,000)
Operating income			$46,000

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

a.

Calculation of Unit Costing Goods manufactured under variable costing:

Variable cost of goods manufactured = $374,400

Number of units produced = 3,900

Unit cost of goods manufactured = Variable cost of goods manufactured / Number of units produced

= 374,400/3,900

= $96

b.

Calculation of Unit Costing Goods manufactured under absorption costing:

Variable cost of goods manufactured = $374,400

Fixed manufacturing costs = $171,600

Total manufacturing costs = Variable cost of goods manufactured + Fixed manufacturing costs

= 374,400+171,600

= $546,000

Unit cost of goods manufactured = Total manufacturing costs / Number of units produced

= 546,000/3,900

= $140

Variable costing	$96
Absorption costing	$140