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*please type out the answer. The Hampton Company produces and sells a single pro

ID: 2437561 • Letter: #

Question

*please type out the answer.

The Hampton Company produces and sells a single product. The following data refer to the year just completed.

Selling price

$450

Units in beginning inventory

0

Units produced

25,000

Units sold

22,000

Variable costs per unit:

Direct materials

$150

Direct labor

$75

Variable manufacturing overhead

$25

Variable selling and admin

$15

Fixed costs:

Fixed manufacturing overhead

$275,000

Fixed selling and admin

$200,000



Required:
Compute the cost of a single unit of product under both the absorption costing and variable costing approaches.
Prepare an income statement for the year using absorption costing.
Prepare an income statement for the year using variable costing.

Selling price

$450

Units in beginning inventory

0

Units produced

25,000

Units sold

22,000

Variable costs per unit:

Direct materials

$150

Direct labor

$75

Variable manufacturing overhead

$25

Variable selling and admin

$15

Fixed costs:

Fixed manufacturing overhead

$275,000

Fixed selling and admin

$200,000

Explanation / Answer

1 Absorption costing: Direct materials 150 Direct labor 75 Variable manufacturing overhead 25 Fixed manufacturing overhead 11 =275000/25000 Unit product cost 261 Variable costing: Direct materials 150 Direct labor 75 Variable manufacturing overhead 25 Unit product cost 250 2 Income statement absorption costing: Sales 9900000 =22000*450 Cost of goods sold 5742000 =22000*261 Gross margin 4158000 Selling and administrative expenses 530000 =200000+(22000*15) Net operating income 3628000 Income statement variable costing: Sales 9900000 Variable expenses: Variable cost of goods sold 5500000 Variable selling and administrative expenses 330000 Total Variable expenses 5830000 Contribution margin 4070000 Fixed expenses: Fixed manufacturing overhead 275000 Fixed selling and administrative expenses 200000 Total Fixed expenses 475000 Net operatimg income(loss) 3595000