Chapter 5 Problem 6 6. Direct and absorption costing The information that follow

Question

Chapter 5 Problem 6 6. Direct and absorption costing The information that follows pertains to Consumer Products for the year ended December 31, 19X6. Inventory, 1/1/X6 24,000 units Units manufactured 80,000 Units sold 82,000 Inventory, 12/31/X6 ? units Manufacturing costs: Direct materials $3 per unit Direct labor $5 per unit Variable factory overhead $9 per unit Fixed factory overhead $280,000 Selling & administrative expenses: Variable $2 per unit Fixed $136,000 Assume that costs have been stable in recent years. Instructions: a. Compute the number of units in the ending inventory. b. Calculate the cost of a unit assuming use of: 1. Direct costing. 2. Absorption costing. c. Prepare an income statement for the year ended December 31, 19X6, by using direct costing. d. Prepare an income statement for the year ended December 31, 19X6, by using absorption costing.

Explanation / Answer

A ending inventory = 24000+80000-82000 = 22000

B1. direct method = (3+5+9+2)*82000 = 15580002.
2. Absorption costing = 1558000 + 280000 + 136000 = 1722000

C Let selling price be Pnet sales = 82000
PCOGS = 1558000
net income = 82000P - 1558000

D net sales = 82000 PCOGS = 1722000
   net income = 82000P - 1722000

= 24000 + 80000 - 82000 = 22000
(1) Direct costing: $3 + $5 + $9 + $2 = $19
(2) Absorption costing: $3 + $5 + $9 + 280000/80000= $20.50

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.