Question

# Cost of Goods Manufactured, using Variable Costing and Absorption Costing On December 31, the end of...

Cost of Goods Manufactured, using Variable Costing and Absorption Costing

On December 31, the end of the first year of operations, Frankenreiter Inc., manufactured 4,200 units and sold 3,600 units. The following income statement was prepared, based on the variable costing concept:

 Frankenreiter Inc. Variable Costing Income Statement For the Year Ended December 31, 20Y1 Sales \$1,584,000 Variable cost of goods sold: Variable cost of goods manufactured \$886,200 Inventory, December 31 (126,600) Total variable cost of goods sold 759,600 Manufacturing margin \$824,400 Total variable selling and administrative expenses 190,800 Contribution margin \$633,600 Fixed costs: Fixed manufacturing costs \$407,400 Fixed selling and administrative expenses 126,000 Total fixed costs 533,400 Income from operations \$100,200

Determine the unit cost of goods manufactured, based on (a) the variable costing concept and (b) the absorption costing concept.

 Variable costing \$ Absorption costing \$

=\$533400/4200 units =\$127 per unit

Unit product cost under Absorption costing:-Direct materials + Direct Labor+Variable manufacturing overhead + fixed manufacturing overhead

=(Variable cost of goods manufactured/Units produced) + fixed manufacturing overhead

=(\$886200/4200 units)+\$127

=\$211+\$127 =\$338 per unit

2)-Unit product cost under variable costing:-Direct materials + Direct Labor+Variable manufacturing overhead

=(Variable cost of goods manufactured/Units produced)

=(\$886200/4200 units)

=\$211 per unit

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