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Pitt Company has the following data for 20X4 concerning its manufacturing operations. PITT COMPANY DATA FOR...

Pitt Company has the following data for 20X4 concerning its manufacturing operations. PITT COMPANY DATA FOR 20X4 SALES AND MANUFACTURING OPERATIONS Selling price per unit $ 120 Variable manufacturing cost per unit 95 Variable operating cost per unit 15 Total fixed manufacturing costs 500,000 Total fixed operating costs 100,000 The company produced 100,000 units during the year and sold 90,000 of those units. REQUIRED: Answer the following questions related to the above data, showing appropriate calculations to support your answers. (5) What is the company's net income for the year under variable costing? (6) What is the value of the company's ending inventory under variable costing? (7) What is the company's net income for the year under full absorption costing? (8) What is the value of the company's ending inventory under full absorption costing?

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Answer #1

Calculate unit product cost :

Variable costing Absorption costing
Variable manufacturing cost per unit 95 95
Fixed manufacturing cost per unit 0 500000/100000 = 5
Total unit product cost 95 100

5) Net income under variable costing = (120-95-15)*90000-600000 = 300000

6) Value of ending inventory under variable costing = 95*10000 = 950000

7) Net income under absorption costing = (120-100-15)-100000 = 350000

8) Ending inventory under absorption costing = 10000*100 = 1000000

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