2. a. The unit product cost under absorption costing is:
Direct materials ... $20
Direct labor ... 8
Variable manufacturing overhead .... 2
Unit product cost ... $30
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Solutions Manual, Chapter 7 363
Problem 7-10 (continued)
b. The variable costing income statement is:
Sales (8,000 units × $75 per unit) ... $600,000
Less variable expenses:
Variable cost of goods sold:
Beginning inventory ... $ 0
Add variable manufacturing costs
(10,000 units × $30 per unit)... 300,000
Goods available for sale ... 300,000
Less ending inventory
(2,000 units × $30 per unit) ... 60,000
Variable cost of goods sold... 240,000
Variable selling expenses
(8,000 units × $6 per unit)... 48,000 288,000
Contribution margin ... 312,000
Less fixed expenses:
Fixed manufacturing overhead ... 100,000
Fixed selling and administrative expenses ... 200,000 300,000
Net operating income... $ 12,000
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