Diego Company manufactures one product that is sold for $72 per unit in two geog
ID: 2453702 • Letter: D
Question
Diego Company manufactures one product that is sold for $72 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 43,000 units and sold 38,000 units.
The company sold 28,000 units in the East region and 10,000 units in the West region. It determined that $170,000 of its fixed selling and administrative expenses is traceable to the West region, $120,000 is traceable to the East region, and the remaining $56,000 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.
5. what is the company's total gross margin under absorption costing
What is the company’s total gross margin under absorption costing?
6. What is the company’s net operating income (loss) under absorption costing?
8-1. What is the company’s break-even point in unit sales?
Diego Company manufactures one product that is sold for $72 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 43,000 units and sold 38,000 units.
The company sold 28,000 units in the East region and 10,000 units in the West region. It determined that $170,000 of its fixed selling and administrative expenses is traceable to the West region, $120,000 is traceable to the East region, and the remaining $56,000 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.
5. what is the company's total gross margin under absorption costing
What is the company’s total gross margin under absorption costing?
Explanation / Answer
Company's groos margin under absorption costing is $570,000 (on th basis of above calcualtions)
Company's operationg income under absorption costing is $34,000 (on th basis of above calcualtions)
(2) Marginal Costing
(8-1) BEP Sales in unit = Fixed Cost or period cost / Contributin per unit
= (774000+346000)/(72-44) = 1,120,000/28 = 40,000 units.
Sales units at BEP (40,000) is above the actual sales volume (38,000 units)
Data on the basis of absorption costing method East Region West region Unit rate ($) Amount ($) Amount ($) Amount ($) A) Sales @$72 28,000 2,016,000 10,000 720,000 38,000 2,736,000 B) Production cost of goods for 43,000 units) i.Direct Material 22 616,000 220,000 946,000 ii.Direct Labour 14 392,000 140,000 602,000 iii.Variable Manufacturing Exp. 3 84,000 30,000 129,000 iv.Fixed Manufacturing exp. 504,000 180,000 774,000 Total Production Cost Total 43,000 units ( sum of ito v) 1,469,020 (1,469,020) 524,650 (524,650) 2,451,000 Less: Closing Inventory (285,000) C) Production cost of sales (38,000 units) 2,166,000 (2,166,000) D) Gross Margin 546,980 195,350 570,000 Selling & Admin. Overheads i.Variable Selling & Admin Overhead 5 140,000 50,000 190,000 ii.Fixed selling & Admin exp. (Traceble) 170,000 120,000 290,000 iii.Fixed selling & Admin exp. (Common) 41,265 14,735 56,000 Total Selling & Admin. Cost 351,265 184,735 536,000 -536000 E) Cost of goods sold 1,820,285 709,385 2,702,000 F) Net Operating Income 34,000 Notes: 1) Cost of production per unit (2451000/43000) =57.00 2) Fixed Selling & admin. Exp. apportioned proportionately on the basis of units soldRelated Questions
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