Diego Company manufactures one product that is sold for $77 per unit in two geog

Question

Diego Company manufactures one product that is sold for $77 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 48,000 units and sold 43,000 units. Variable costs per unit: Manufacturing: Direct materials 27 Direct labor Variable manufacturing overhead Variable selling and administrative 5 Fixed costs per year: Fixed manufacturing overhead Fixed selling and administrative expense 864,000 456,000 The company sold 33,000 units in the East region and 10,000 units in the West region. It determined that $220,000 of its fixed selling and administrative expense is traceable to the West region, $170,000 is traceable to the East region, and the remaining $66,000 is a common fixed expense. 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.

Explanation / Answer

Ans 1 Unit product cost under variable costing Direct Material $27 Direct labor 12 Variable Manufacturing overhead 3 Unit product cost $42 ans 2 Unit product cost under absorption costing Direct Material $27 Direct labor 12 Variable Manufacturing overhead 3 Fixed Manufacturing overhead (864000/48000) 18 Unit product cost $60 ans 3 Contribution Margin 1290000 (77-42-5)*43000 ans 4 Contribution Margin 1290000 Less: Fixed Manufacturing overhead 864000 Fixed Selling & Adminitrstive exp 456000 Net operating Income -30000 ans 5 Gross margin 731000 (77-60)*43000 ans 6 Net operating Income Gross margin 731000 Less: S& A exp Variable (5*43000) 215000 Fixed 456000 Net operating Income 60000 ans 7 Varable cosing net operating Income -30000 Add: Fixed manufacturing overhead deferred in ending inventory (5000*18) 90000 Absorption costing net operating income 60000 Dera student I have done the first seven subparts

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