Question

Paint More, LLC has organized a new division to manufacture and sell specialty paint. The division's monthly costs are shown below: Manufacturing costs: Variable costs per unit: Direct materials $12 Variable manufacturing overhead $1 Fixed manufacturing overhead costs (total) $100,000 Selling and administrative costs: Variable 7% of sales Fixed (total) $31,000 Because the production is highly automated, the company includes its labor costs in its fixed manufacturing overhead. The gallons of paint sell for $68 each. During September, the first month of operations, the following activity was recorded: Units produced 5,000 Units sold 4,000 Submit an Excel document with each tab labeled by item number that demonstrates the following: Compute the unit product cost under: Absorption costing Variable costing Prepare an absorption costing income statement for September Prepare a contribution format income statement for September using variable costing

Answer 1

Answer:

Unit Product Cost as per Absorption Costing = Direct Materials + Variable Manufacturing Overhead + Fixed Manufacturing Overhead
Fixed Manufacturing Overhead = 100,000 / 5,000 = $20
Unit Product Cost as per Absorption Costing = $12 + $1 + $20
Unit Product Cost as per Absorption Costing = $33

Unit Product Cost as per Variable Costing = Direct Materials + Variable Manufacturing Overhead
Unit Product Cost as per Variable Costing = $12 + $1
Unit Product Cost as per Variable Costing = $13