Franz began business at the start of this year and had the following costs: vari
ID: 2515981 • Letter: F
Question
Franz began business at the start of this year and had the following costs: variable manufacturing cost per unit, $9; fixed manufacturing costs, $60,000; variable selling and administrative costs per unit, $2; and fixed selling and administrative costs, $266,000. The company sells its units for $49 each. Additional data follow.
There were no variances.
The income (loss) under absorption costing is:
None of these.
$38,000.
$36,000.
$35,000.
$(8,500).
The income (loss) under variable costing is:
$35,000.
some other amount.
$(8,500).
$38,000.
$36,000.
Planned production in units 10,000 Actual production in units 10,000 Number of units sold 9,500Explanation / Answer
Answer
Fixed manufacturing cost
$60000
Actual Production
10000
Fixed cost per unit
$6
Add: variable manufacturing cost
$9
Total manufacturing cost per unit
$15
Income Statement
Sales
9500 x $49
$465,500
(-) Cost of Goods Sold
9500 units x $15
$142,500
Gross Margin
$323,000
(-) variable selling expense
9500 units x $2
$19,000
(-) Fixed selling cost
$266,000
Income (loss) under absorption costing
$38,000
Hence, the correct answer is Option – 2: $38,000
Income Statement
Sales
9500 x $49
$465,500
(-) variable costs
9500 units x $(9 + 2)
$104,500
Contribution margin
$361,000
(-) total fixed costs
[$60000+$266000]
$326,000
Income (Loss) under variable Costing
$35,000
Hence, the correct answer is OPTION 1: $35,000
Fixed manufacturing cost
$60000
Actual Production
10000
Fixed cost per unit
$6
Add: variable manufacturing cost
$9
Total manufacturing cost per unit
$15
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