Galaxy, Inc., a manufacturer of telescopes, began operations on June 1 of the cu
ID: 2471460 • Letter: G
Question
Galaxy, Inc., a manufacturer of telescopes, began operations on June 1 of the current year. During this time, the company produced 60,000 units and sold 40,000 units at a sales price of $600 per unit. Cost information for this year is shown in the following table:
Production costs
Direct materials
$90 per unit
Direct labor
$75 per unit
Variable overhead
$240,000 in total
Fixed overhead
$420,000 in total
Nonproduction costs
Variable selling and administrative
$80,000 in total
Fixed selling and administrative
$520,000 in total
Given the Galaxy, Inc. data, what is net income using absorption costing?
A.
$11,275,000
B.
$17,400,000
C.
$16,360,000
D.
$16,800,000
E.
$16,220,000
Given the Galaxy Inc. data, what is net income using variable costing?
A.
$16,220,000
B.
$17,400,000
C.
$16,360,000
D.
$11,275,000
E.
$16,800,000
Galaxy, Inc., a manufacturer of telescopes, began operations on June 1 of the current year. During this time, the company produced 60,000 units and sold 40,000 units at a sales price of $600 per unit. Cost information for this year is shown in the following table:
Production costs
Direct materials
$90 per unit
Direct labor
$75 per unit
Variable overhead
$240,000 in total
Fixed overhead
$420,000 in total
Nonproduction costs
Variable selling and administrative
$80,000 in total
Fixed selling and administrative
$520,000 in total
Explanation / Answer
Variable selling and administartive expense per unit = 80,000/40,000
= $2 per unit
Variable overhead per unit = 240,000/60,000
= $4 per unit
Total Variable cost per unit = 90 + 75 + 4 + 2
= $171 per unit
..
Total Fixed COst = 420,000 + 520,000
= $940,000
..
Fixed Overhead per unit = 420,000/60000
= $7 per unit
..
..
..
..
..
Net income using absorption costing = (600-171)*40,000 - 40,000*7 - 520,000
= $163600,000 ...Option-C is the correct answer
..
..
Net income using variable costing = (600-171)*40,000 - 420,000 -520,000
= $16220,000 ..Option-A is the Correct answer
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