exercise 2.45 carolina catsup company produces catsup which it sells exclusively
ID: 2372161 • Letter: E
Question
exercise 2.45 carolina catsup company produces catsup which it sells exclusively tofast food resturant in 5 gallon container which sells for $16 each and have the following variable costs
direct material $ 5
direct labor 2
variable overhead 3
budget fixed overhead in 20x0 was $300,000 actual production of 5 gallon containers totaled 150,000 of which 125,000 were sold the company incurred the following selling and administrative expenses
fixed $ 50,000 for the year
variabl $ 1 per container sold
required
A- compute the standard product cost per container of catsup under 1 absorption costing and 2 variable costing
B prepare income statment for 20x0 using absorbing cost 2 variable cost
C reconcile the income reported under the two methods by listing the two key place where the income statment differ
D reconcile the income reported under the two methods using the shortcut method
Explanation / Answer
Year 1
n/a
n/a
150,000
125,000
25,000
Year 1
$16.00
Production and inventory data
Planned production (in units)
Finished-goods inventory (in units) January 1
Actual production (in units)
Less: Sales (in units)
Added to finished-goods inventory (in units)
a. Revenue and cost data
Sales price per unit
Manufacturing costs per unit:
Direct material
Direct labor
Variable manufacturing overhead
Total variable cost per unit
Fixed manufacturing overhead:
Annual fixed overhead
Divided by annual production
Fixed manufacturing overhead per unit
Total absorption cost per unit
Variable selling and administrative cost per unit sold
Fixed selling and administrative cost per year
$5.00
2.00
3.00
$300,000
1.00
$50,000
b.1. Absorption-Costing Income Statement
Sales revenue
Less: Cost of goods sold (at absorption cost)
Gross margin
Less: Selling and administrative expenses
Variable
Fixed
Operating income
325
b.2. Variable-Costing Income Statement
Sales revenue
Less: Variable expenses:
Variable manufacturing costs
Variable selling and administrative costs
Contribution margin
Less: Fixed expenses:
Fixed manufacturing overhead
Fixed selling and administrative expenses
Operating income
275
c. & d. Operating income difference
Units added to inventory
Multiply by fixed manufacturing cost per unit
Difference explained
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