Question

Fresh Air Products manufactures and sells a variety of camping products. Recently the company opened a new plant to manufacture a deluxe portable cooking unit. Cost and sales data for the first month of operations are shown below: Beginning inventory 0 units Units produced 12,000 Units sold 10,000 Manufacturing costs Fixed overhead $96,000 Variable overhead $3 per unit Direct labour $11 per unit Direct material $28 per unit Selling and administrative costs Fixed $207,400 Variable $4 per unit sold The portable cooking unit sells for $112. Management is interested in the opening month’s results and has asked for an income statement. Assuming the company uses absorption costing: Collapse question part (a) Correct answer. Your answer is correct. Calculate the manufacturing cost per unit. Manufacturing cost $Entry field with correct answer 50 per unit SHOW SOLUTION LINK TO TEXT LINK TO TEXT Attempts: 2 of 3 used Collapse question part (b) Prepare an absorption-costing income statement for the first month of operation. Fresh Air Products Income Statement-Absorption Costing For the first month of operations

Answer 1

a. Unit cost under Absorption costing

Direct materials	$28
Direct Labor	$11
Variable manufacturing overhead	$3
Fixed manufacturing overhead ($96,000/12,000)	$8
Production cost per unit	$50

B. Income statement under Absorption costing

Sales(10,000×$112)		$1,120,000
Less: Cost of goods sold
Opening inventory	$0
Add:Cost of goods manufactured (12,000×$50)	$600,000
Cost of goods available for sale	$600,000
Less: Ending inventory (2,000×$50)	($100,000)
Cost of goods sold		($500,000)
Gross margin		$620,000
Selling and administrative expense
Fixed	$207,400
Variable(10,000×$4)	$40,000
Total selling and administrative expense		($247,400)
Net income		$372,600

_____×_____

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