em 2: Income under absorption costing and variable costing (35 points) Gray Heng

Question

em 2: Income under absorption costing and variable costing (35 points) Gray Henge Company, The a manufacturer of landscaping blocks, began operations on January 1, 2017 e company's sales and cost information for 2017 is shown below Manufacturing costs Production and sales for the year Direct materialsx $120 per blocknits sold236,000 blocks Direct labor..$1.70 per block Units sold Sales price per produce50,000 blocks unit. $11.85 per block Variable factory overhead..$287,500 in total Non production costs Variable selling and administrative.... $165,200 in total Fixed selling and administrative..$590,000 in total Requirements: a Compute the 2017 manufacturing cost per unit using absorption Variable Costing your computations Absorption Costing Computations Direct materials Direct labor Variable overhead Fixed overhead Total cost per unit b. Compute Gray Henge's operating income for 2017 under variable costing. Show your work. Amounts Computations Titles

Explanation / Answer

Manufacturing Cost Per Unit: Computation Absorption Costing Variable Costing Variable OH: Direct Material 1.20 1.20 Variable FOH 287500 Direct Labor 1.70 1.70 Units Produced 250000 Variable OH Working Note 1.15 1.15 Variable OH PU 1.15 Fixed OH Working Note 1.80 0.00 Total Cost PU 5.85 4.05 Fixed OH: FOH 450000 Note: Fixed OH does not form part of MC PU for Variable Costing Units Produced 250000 Note: Variable & Fixed S&A Expense are not part of MC PU in any form of Costing. Fixed OH PU 1.80 Income Statement Under Variable Costing: Sales 2796600 (236000*11.85) Less: Variable Cost of Goods Sold Opening Inventory 0 Add: Variable Cost of Goods Manu 1012500 (250000*4.05) Variable COGS available for Sales 1012500 Less: Closing Inventory 56700 955800 (250000-236000)*4.05) Gross Contribution Margin 1840800 Less: Variable S&A Expense 165200 Contribution Margin 1675600 Less: Period Expenses Fixed Mauafacturing OH 450000 Fixed S&A OH 590000 1040000 Net Operating Income 635600

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