The Van Halen Company manufactures and sells guitar tuners. The data table below
ID: 2491189 • Letter: T
Question
The Van Halen Company manufactures and sells guitar tuners. The data table below provides selected company information for Van Halen’s operation over the past year:
Units sold during year
30,000
Units produced during year
45,000
Units in ending inventory
15,000
Variable manufacturing (product) cost per unit
$ 4.50
Fixed manufacturing overhead cost (annual total)
$ 20,250
Selling price per unit
$ 12.00
Variable selling and administrative expense per unit
$ 1.00
Fixed selling and administrative expenses (annual total)
$ 4,000
Note there were no units sitting in the company’s beginning inventory for the year. Using the information in the company’s data table above, please answer the following four multi-part questions by inserting your answers directly into each of the empty “answer boxes” provided. The multiple answer boxes for each question have purposely been listed in a logical, step-by-step sequence to smoothly walk you through the required calculations and solution to each problem. Questions #1 and #2 require you to use the given company data from the above table to produce a full (absorption) costing income statement and then calculate the corresponding value of the ending inventory applying full (absorption) costing. Questions #3 and #4 are similar to Questions #1 and #2, respectively, except these will instead require you to produce a variable costing (contribution margin) income statement and then calculate the corresponding value of the ending inventory applying variable costing.
To assist you in completing all portions of these four multi-part questions, note that beside each empty answer box is a brief hint (if needed) indicating how you can quickly arrive at the answer to enter into each box. In some cases, these hints will simply refer you back to a piece of information obtained directly from the table of company data given above. In other cases, you may need to calculate an answer through addition, subtraction, multiplication, or division of previously completed values in earlier answer boxes. It’s also possible that an entry to a specific answer box will just need to be copied from a previously calculated value. It’s up to you to understand each of the pieces of data, work through the calculation process, and insert the appropriate answers into each answer box.
Question 1. Prepare a Full (Absorption) Costing Income Statement using the company data provided.
Step 1: Calculate the Sales Revenue Enter answer: HINTS:
Units sold during year
(given in data table)
Selling price per unit
(given in data table)
Sales revenue
(calculate by multiplication)
Step 2: Calculate Fixed Mfg Overhead Cost Per Unit
Fixed manufacturing overhead cost (annual total)
(given in data table)
Units produced during year
(given in data table)
Fixed manufacturing overhead cost per unit
(calculate by division)
Step 3: Calculate the Product Cost Per Unit
Variable manufacturing (product) cost per unit
(given in data table)
Fixed manufacturing overhead cost per unit
(copy value from above)
Product cost per unit
(calculate by addition)
Step 4: Calculate the Cost of Goods Sold (COGS)
Product cost per unit
(copy value from above)
Units sold during year
(given in data table)
Cost of Goods Sold (COGS)
(calculate by multiplication)
Step 5: Calculate the Variable Selling and Admin Expenses
Variable selling and administrative expense per unit
(given in data table)
Units sold during year
(given in data table)
Variable selling and administrative expenses
(calculate by multiplication)
Step 6 (Final Step): Produce Full/Absorption Costing Income Statement
Sales Revenue
(copy value from above)
Cost of Goods Sold (COGS)
(copy value from above)
Gross Profit (Margin)
(calculate by subtraction)
Variable Selling and Administrative Expenses
(copy value from above)
Fixed Selling and Administrative Expenses
(given in data table)
Net Income
(calculate by subtraction)
Question 2. Applying full (absorption) costing, calculate the total value of the ending inventory.
Product cost per unit
(copy value from above)
Units in ending inventory
(given in data table)
Value in ending inventory (by full costing)
(calculate by multiplication)
Question 3. Prepare a Variable Costing Income Statement using the company data provided.
Step 1: Calculate the Sales Revenue Enter answer: HINTS:
Units sold during year
(given in data table)
Selling price per unit
(given in data table)
Sales revenue
(calculate by multiplication)
Step 2: Calculate Variable Manufacturing Costs
Units sold during year
(given in data table)
Variable manufacturing (product) cost per unit
(given in data table)
Variable manufacturing costs
(calculate by multiplication)
Step 3: Calculate Variable Selling and Admin Expenses
Units sold during year
(given in data table)
Variable selling and administrative expense per unit
(given in data table)
Variable selling and administrative expenses
(calculate by multiplication)
Step 4 (Final Step): Produce Variable Costing Income Statement
Sales Revenue
(copy value from above)
Variable Manufacturing Costs
(copy value from above)
Variable Selling and Administrative Expenses
(copy value from above)
Contribution Margin
(calculate by subtraction)
Fixed Manufacturing Overhead Cost
(given in data table)
Fixed Selling and Administrative Expenses
(given in data table)
Net Income
(calculate by subtraction)
Question 4. Applying variable costing, calculate the total value of the ending inventory.
Variable manufacturing (product) cost per unit
(given in data table)
Units in ending inventory
(given in data table)
Value in ending inventory (by variable costing)
(calculate by multiplication)
Units sold during year
30,000
Units produced during year
45,000
Units in ending inventory
15,000
Variable manufacturing (product) cost per unit
$ 4.50
Fixed manufacturing overhead cost (annual total)
$ 20,250
Selling price per unit
$ 12.00
Variable selling and administrative expense per unit
$ 1.00
Fixed selling and administrative expenses (annual total)
$ 4,000
Explanation / Answer
Van halen - cost information Step 1 Sales revenue Units sold during the years 30000 Selling price per unit $12 sales Revenue ( 30000*12) $360,000 Step 2 Fixed manufacturing overhead cost per unit Fixed manufacturinf o/h cost $20,250.00 Units produced during the year 45000 Fixed manufacturing o/h cost per unit $0.45 Step 3 product cost per unit variable manufacturing cost 4.5 Fixed manufacturing o/h cost per unit 0.45 product cost per unit 4.95 Step 4 Cost of goods sold Product cost per unit 4.95 Units sold during the year 45000 COGS (1.45*30000) 222750 Step 5 Variable selling and admin expenses Variable selling and admin exp per unit 1 Units sold during the year 30000 Variable selling and admin expenses 30000 Step 6 Sales revenue $360,000 COGS $222,750 Gross profit $137,250 Variable selling and admin expenses $30,000 Fixed selling and admin expenses $4,000 Net income $103,250 Ques 2 Value of ending inventory Product cost per unit 4.95 Units of ending inventory 15000 Value of ending inventory 74250 Ques 3 Step 1 Sales revenue Units sold during the years 30000 Selling price per unit $12 sales Revenue ( 30000*12) $360,000 step - 2 Variable manufacturing cost Units sold during the years 45000 Variable manufacturing cost per unit 4.5 Variable manufacturing cost 202500 Step 5 Variable selling and admin expenses Variable selling and admin exp per unit 1 Units sold during the year 30000 Variable selling and admin expenses 30000 Step 4 sale revenue $360,000 variable manufacturing cost 202500 Variable selling and admin cost 30000 Contribution margin $127,500 Fixed manufacturing cost 20250 Fixed selling and admin cost 4000 Net income $103,250 Ques - 4 Variable manufactiuring cost per unit 4.5 Units in ending inventory 15000 Value of closing inventory 67500
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