required: Homework-Chapter 6 5 Ogilvy Company manufactures and sells one product

Question

required: Homework-Chapter 6 5 Ogilvy Company manufactures and sells one product. The following information pertains to each of the company's first three years of Variable cost per unit points Direct materiale Pixed costs per year: Direct labor Pixed manufacturing overhead Pixed selling and adminintrative expenses $910,000 837,000 $236,000 eBock The company does not incur any variable manufacturing overhead costs or variable selling and administrative expenses. During its first year of operations, Oglivy produced 65,000 units and sold 65,000 units. During its second year of operations, it produced 65,000 units and sold 62,200 units. In its third year, Ogilvy produced 65,000 units and sold 67,800 units. The selling price of the company's Print product is $53 per unit Referencer Required: 1. Assume the company uses super-variable costing a. Compute the unit product cost for Year 1, Year 2, and Year 3 b. Prepare an income statement for Year 1, Year 2, and Year 3 2. Assume the company uses a variable costing system that assigns $14 of direct labor cost to each unit produced a. Compute the unit product cost for Year 1, Year 2, and Year 3 b. Prepare an income statement for Year 1, Year 2, and Year 3. 3. Reconcile the difference between the super-variable costing and variable costing net operating incomes in Years 1, 2, and 3. Complete this question by entering your answers in the tabs below. Reg 1A Req 18Req 2A Rq 28 Req 3 Compute the unit product cost for Year 1, Year 2, and Year 3. Assume the company uses super-variable costing

Explanation / Answer

1a Unit Product Cost Year 1 $22 Year 2 $22 Year 3 $22 1b Ogilvy Company Super-Variable Costing Income Statement Year 1 Year 2 Year 3 Units Sold                65,000               62,200               67,800 Sales $       3,445,000 $      3,296,600 $      3,593,400 (53 x Units Sold) Variable cost of goods sold           1,430,000          1,368,400          1,491,600 (22 x Units Sold) Contribution margin           2,015,000          1,928,200          2,101,800 Fixed expenses: Direct labor              910,000             910,000             910,000 Fixed manufacturing overhead              837,000             837,000             837,000 Fixed selling and administrative              236,000             236,000             236,000 Total fixed expenses           1,983,000          1,983,000          1,983,000 Net operating income (loss)                32,000             (54,800)             118,800 2a Unit Product Cost Year 1 $36 (22+14) Year 2 $36 Year 3 $36 2b Ogilvy Company Variable Costing Income Statement Year 1 Year 2 Year 3 Units Sold                65,000               62,200               67,800 Sales $       3,445,000 $      3,296,600 $      3,593,400 Variable cost of goods sold           2,340,000          2,239,200          2,440,800 Contribution margin           1,105,000          1,057,400          1,152,600 Fixed expenses: Fixed manufacturing overhead              837,000             837,000             837,000 Fixed selling and administrative              236,000             236,000             236,000 Total fixed expenses           1,073,000          1,073,000          1,073,000 Net operating income (loss)                32,000             (15,600)               79,600 3 Year 1 Year 2 Year 3 Super-variable costing net operating income (loss)                32,000             (54,800)             118,800 Add: Direct labor deferred in inventory under variable costing 0 39200 0 Deduct: Direct labor released from inventory under variable costing 0 0 39200 Variable costing net operating income (loss)                32,000             (15,600)               79,600

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