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Chapter 21: Q1TI (page 1145)

Pierce Company had the following costs:

Units produced

500 units Manufacturing costs:

Direct materials

$ 25 per unit Direct labor

45 per unit Variable manufacturing overhead

15 per unit Fixed manufacturing overhead

5,000 per year Selling and administrative costs:

Variable selling and administrative costs

30 per unit Fixed selling and administrative costs

3,200 per year

Calculate the unit product cost using absorption costing and variable costing

Short Answer

Expert verified

Answer

Total unit product cost as per variable costing is $85 and $95 as per absorption costing.

Step by step solution

01

Calculation of unit product cost as per variable costing

Particulars
Amount
Direct material
$25
Direct labor
$45
Variable manufacturing overhead
$15
Total unit product cost
$85
02

Calculation of unit product cost as per absorption costing

Particulars
Amount
Direct material
$25
Direct labor
$45
Variable manufacturing overhead
$15
Fixed manufacturing overhead ($5,000/500)
$10
Total unit product cost
$95

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Most popular questions from this chapter

Computing absorption costing gross profit

Refer to your answers to Short Exercise S21-6. Product X sells for \(175 per unit. Assume no beginning inventories. Calculate the gross profit using absorption costing when Adamson:

  1. Produces and sells 2,000 units.
  2. Produces 2,500 units and sells 2,000 units.
  3. Produces 5,000 units and sells 2,000 units.

S21-6 Direct materials \) 41 per unit Direct labor 57 per unit Variable manufacturing overhead 7 per unit Fixed manufacturing overhead 20,000 per ye

Question: Using variable costing, service company

Divine Pool Cleaning Service provides pool cleaning services to residential customers. The company has three employees, each assigned to specific customers. The company considers each employee’s territory as a business segment. The company incurs variable costs that include the employees’ wages, pool chemicals, and gas for the service vans. Fixed costs include depreciation on the service vans. Following is the income statement for the month of August:

Requirements

1. Calculate the contribution margin ratio for each business segment.

2. The business segments had the following number of customers: Byson, 80; Moore, 50; and Freeman, 110. Compute the service revenue per customer, variable cost per customer, and contribution margin per customer for each business segment.

3. Which business segment was most profitable? List some possible reasons why this segment was most profitable. How might the various reasons affect the company in the long term?

Question: Computing absorption costing operating income

Refer to the information for Concord, Inc.

Requirements

  1. Using absorption costing, calculate the unit product cost.
  2. Prepare an income statement using the traditional format.

Use the following information for Exercises E21-14 and E21-15.

Concord, Inc. has collected the following data for November (there are no beginning inventories):

Units produced and sold 500 units Sales price $ 450 per unit Direct materials 64 per unit Direct labor 68 per unit Variable manufacturing overhead 26 per unit Fixed manufacturing overhead 7,500 per month Variable selling and administrative costs 15 per unit Fixed selling and administrative costs 4,400 per month

Calculating gross profit and operating income, absorption costing Calculate the gross profit and operating income for June using absorption costing

Use the following information for Short Exercises S21-4 and S21-5.

Dracut Company reports the following information for June:

Net Sales Revenue $ 755,000 Variable Cost of Goods Sold 240,000 Fixed Cost of Goods Sold 198,000 Variable Selling and Administrative Costs 168,000 Fixed Selling and Administrative Costs 79,000

Analyzing profitability Sampler Company sells two products, Sigma and Zeta, with a sales mix of 70% and 30%, respectively. Sigma has a contribution margin per unit of \(26, and Zeta has a contribution margin per unit of \)21. The company sold 700 total units in September. Calculate the total amount each product contributed to the coverage of fixed costs and the total contribution margin for the company.
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