[The following information applies to the questions displayed below Diego Compan

Question

[The following information applies to the questions displayed below Diego Company manufactures one product that is sold for $76 per unit in two geographic regions-the East and West regions. The following information pertains to the company's first year of operations in which it produced 58,000 units and sold 54,000 units Variable costs per unit Manufacturing Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative 23 15 3 3 Fixed costs per year Fixed manufacturing overhead Fixed selling and administrative expenses $ 1160,000 $ 640.000 The company sold 40.000 units in the East region and 14.000 units in the West region. It determined that $320,000 of its fixed selling and administrative expenses is traceable to the West region, $270,000 is traceable to the East region, and the remaining $50,000 is a common fixed cost. The company will continue to incur the total amount of its fixed manufacturing overhead costs as long as it continues to produce any amount of its only product

Explanation / Answer

(11.)

CALCULATION ON NET OPERATING INCOME(ABSORPTION COSTING)

NOTE : CALCULATION OF COGS = COST PER UNIT * NUMBER OF UNITS SOLD

= $61 * 54000 UNITS

= $3294000  

NOTES : CALCULATION OF COST PER UNIT

NOTES : CALCULATION OF SELLING AND ADMINISTRATIVE = 54000 UNITS * $3 + $640000

= $162000 + $640000

= $802000

(12.)

CALCULATION OF NET OPERATING INCOME (ABSORPTION COSTING)(YEAR 2)

NOTE : CALCULATION OF COGS = COST PER UNIT * NUMBER OF UNITS SOLD

= $62.48 * 54000 UNITS

= $3373920

NOTES : CALCULATION OF COST PER UNIT

NOTES : CALCULATION OF SELLING AND ADMINISTRATIVE = 54000 UNITS * $3 + $640000

= $162000 + $640000

= $802000

CALCULATION OF NET OPERATING INCOME (VARIABLE COSTING)

HENCE HERE THE NET OPERATING INCOME UNDER ABSORPTION COSTING IS LOWER THAN NET OPERATING INCOME UNDER VARIABLE COSTING IN YEAR 2 .

(13.)

STATEMENT SHOWING CONTRIBUTION FORMAT SEGMENTED INCOME STATEMENT FOR EAST AND WEST REGIONS

LESS: FIXED COSTS CONTROLLABLE

(by Segment Manager)

CONTRIBUTION CONTROLLED

(by Segment Manager)

NOTES : CALCULATION OF VARIABLE COST (IN $) (EAST REGION) = (23 + 15 + 3 + 3)* 40000UNITS

= $1760000

CALCULATION OF VARIABLE COST (IN $) (WEST REGION) = (23 + 15 +3 + 3)*14000 UNITS

= $616000

CALCULATION OF FIXED COST (IN $) (EAST REGION) = 1160000*40000UNITS/54000UNITS + 640000*40000UNITS/54000UNITS

= 859259 + 474074

= $1333333

CALCULATION OF FIXED COST (IN $) (WEST REGION) = 1160000*14000UNITS/54000UNITS + 640000*14000UNITS/54000UNITS

=300741 + 165926

= $466667

  

PARTICULARS CALCULATION AMOUNT(IN $) SALES $76 * 54000 UNITS 4104000 LESS: COST OF GOODS SOLD NOTES 3294000 GROSS PROFIT 810000 LESS: SELLING AND ADMINISTRATIVE NOTES 802000 OPERATING INCOME 8000

Related Questions

Navigate

• Browse (All)
• Browse #
• Subjects

---

---

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