ALASKA MANUFACTURING .......began its first year of operations on January 1, 201

Question

ALASKA MANUFACTURING .......began its first year of operations on January 1, 2016. Costs incurred for 2016 were as follows: irect materials used irect manufacturing labor cots lant energy costs 147,600Variable 38.400 Variable 2,000 Variable 14,000 Variable Indirect manufacturing labor costs Indirect manufacturing labor costs 19,000 Fixed 11,000 Variable r indirect production costs indirect production costs 14,000 Fixed arketing, distribution and customer-service costs 128,000 Variable arketing, distribution and customer-service costs 48,000 Fixed 56,000 Fixed dministrative costs Variable manufacturing costs are variable with respect to units produced, while variable marketing, distribution and customer- service costs are variable with respect to units sold Inventory data is as follows Janury 1,2016 Decerber 31, 2016 Direct materials Work in process Finished goods 0 units 0 units ? units In 2016, the company produced 123,000 units. Company standards require 2 pounds of direct material per unit. Revenues for 2016 were $594,000. The selling price per unit and the purchase price per pound of direct materials were constant throughout the year. Finished-goods inventory at December 31, 2016 was $26,000

Explanation / Answer

ans 1 Variable cost are the cost which incraeses with the increase in output and vice versa. The variable cost unit remains the same irrespective with the level of output.Direct material, direct labor, variable manufacturing overhead etc are example of variable cost. Fixed cost are the cost which remains same irrespectibve of the level of output. Within a particular range it remains same, but the fixed cost per unit increases with decrease in output and decreases with increase in output. It is impotant to distinguish dure to the nature of these cost, as when output is increases only variable cost is increased but fixed cost remains the same. ans 2 Ending Direct material inventory 2400*.6059 $1,454 if rounded off to two decimal 2400*.61 1464 Beginning inventory 0 Total direct material purchased 2*123000 246000 Less: enidng direct material inventory 2400 Direct material used 243600 Cost of direct material used $147,600 Cost per lbs 147600/243600 $0.6059 ans 3 Ending Finished goods inventory in units $26000/2 13000 units Product cost per unit (147600+38400+2000+14000+19000+11000+14000)/123000 2.00 ans 4 Selling price in 2016 5.4 ans Revenue/No. of units sold 594000/(123000-13000)= 594000/110000 ans 5 Net operating Income 594000-(110000*2)-128000-48000-56000 142000 Dear student I have done the first five subparts

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