1. Leibson Company, which has only one product, has provided the following data
ID: 2435500 • Letter: 1
Question
1.
Leibson Company, which has only one product, has provided the following data concerning its most recent month of operations:
Selling Price
$ 99.00
Units in beginning inventory
500
Units produced
6,800
Units sold
6,900
Units in ending inventory
400
Variable costs per unit:
Direct materials
$ 41.00
Direct labor
$ 28.00
Variable manufacturing overhead
$ 3.00
Variable selling and administrative
$ 8.00
Fixed costs:
Fixed manufacturing overhead
$47,600.00
Fixed selling and administrative
$82,800.00
The company produces the same number of units every month, although the sales in units vary from month to month. The company's variable costs per unit and total fixed costs have been constant from month to month.
Required:
a. What is the unit product cost for the month under variable costing?
b. What is the unit product cost for the month under absorption costing?
c. Prepare a contribution format income statement for the month using variable costing.
d. Prepare an income statement for the month using absorption costing.
e. Reconcile the variable costing and absorption costing net operating incomes for the month
Explanation / Answer
Unit Product Cost for the month under Variable Costing Direct Material 41 Direct labor 28 Variable MOH 3 Unit Product Cost 72 Unit Product Cost for the month under Absorption Costing Direct Material 41 Direct labor 28 Variable MOH 3 Fixed Manufacturing Over Head 7 (47,600 / 6800) Unit Product Cost 79 Contribution Format Income Statement Sales(6900*99) 683100 Less: Variable Expenses Variable Cost of Goods Sold -496800 (6900 * 72 ) Variable Selling & Admin Expenses (6900 * 8 ) -55200 Contribution Margin 131100 Less:Fixed Expenses: Manufacturing -47600 Selling -82800 Net Operating Income 700 Income Statement Using Absorption Costing Sales 683100 (6900 *99) Cost Of Goods Sold 545100 (6900 * 79) Gross Margin 138000 Selling & Administrative Expenses Variable -55200 Fixed -82800 Net Income 0 Reconciliation of the Income Under Variable Costing And Aborption Costing Net Income under Variable Costing 700 Add : MOH due to Inventories -700 Net Income under Absorption Costing 0 FMOH in the Ending Inventories (7 * 400 ) -2800 FMOH in the beginning Inventories 3500 (7 *500 ) Differnce in MOH due to inventories -700
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