9-3:Potter Replica produces a specialty statue for sale to collectors. In 2017,

Question

9-3:Potter Replica produces a specialty statue for sale to collectors. In 2017, Potter’s expected and actual output was 12,000 statues. Potter sold 10,000 statues at an average selling price of $425. Other information for Potter for 2017 is given below:

Direct materials $87.50 per unit

Variable manufacturing costs $50.00 per unit

Fixed manufacturing costs $62.50 per unit

Variable administrative costs $25.00 per unit

Calculate Potter Replica’s cost per statue under (a) absorption costing, (b) variable costing, and (c) throughput costing. What is Potter’s throughput margin for 2017

Explanation / Answer

1 Absorption costing Year 1 Direct material 87.5 Variable manufacturing overheads 50 Fixed manufacturing 62.5 Total product cost 200 Units produced 12000 Units sold 10,000 2 Variable costing Year 1 Direct material 87.5 Variable manufacturing overheads 50 Product cost per unit 137.5 Units manufactured 12000 Units sold 10,000 3 throughput costing Year 1 Direct material 87.5 Units manufactured 12000 Units sold 10,000 Income statement Sales revenue 4250000 Less Variable expense 875000 (87.5*10000) Contribution margin 3375000 Less Fixed cost Direct labor 600000 Fixed manufacturing overheads 750000 Variable administrative expense 250000 (25*10000) Total fixed expenses 1600000 Net operating income 1775000

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