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Question

Safari File Edit ViewHistory Bookmarks Window Help Chapter 6 Homework Help Save & Exit 4 Exercise 6-15 Absorption Costing Unit Product Cost and Income Statement [LO6-1, LO6-2) 1.42 points Chuck Wagon Grills, Inc, makes a single produci-a handmade specialty barbecue gril hat it sells for $210, Data for last years operations follow Units in beginning inventory Units sold Ueits in ending inventory Var Lable costs per uniti Book 10,000 9,100 Print Direct materials Direct labor Variable manufacturing overhead Variable selling and admi nistrative Total variable cost per unit 26 290.000 $795,000 Fixed eosta Pixed manafacturing overhoad Pixed selling and adniniatrative Tocal fixed costs Required: t Assume that the company uses absorption costing. Compute the unit product cost for one barbecue gil 2. Assume that the company uses absorption costing Prepare an income statement for last year Complete this question by entering your answers in the tabs below

Explanation / Answer

Computation of unit product cost under absorption costing:

Direct material

$ 61

Direct labor

$ 39

Variable manufacturing overhead

$ 11

Fixed manufacturing overhead

$ 29

Total unit cost

$140

Fixed manufacturing overhead per unit = Total fixed manufacturing overhead /Total units produced

= $ 290,000/10,000 = $ 29

Under absorption costing fixed and variable both manufacturing cost are included in product cost.

Chuck Wagon Grills. Inc.

Absorption Costing Income Statement

Sales

$ 1,911,000

Less: Cost of goods sold

$ 1,274,000

Gross margin

$ 637,000

Less: Selling and administrative expenses

$ 641,500

Net operating income(loss)

$ (4,500)

Sales = No. of unit sold x Sales per unit = 9,100 x $ 210 = $ 1,911,000

Cost of goods sold = = No. of unit sold x cost per unit = 9,100 x $ 140 = $ 1,274,000

Selling and administrative expenses

= Fixed selling and administrative expenses + Variable selling and administrative expenses

= $ 505,000 + (9,100 x $ 15)

= $ 505,000 + $ 136,500 = $ 641,500