Chuck Wagon Grills, Inc., makes a single product—a handmade specialty barbecue g

Question

Chuck Wagon Grills, Inc., makes a single product—a handmade specialty barbecue grill that it sells for $210. Data for last year’s operations follow:

Required:

1. Assume that the company uses absorption costing. Compute the unit product cost for one barbecue grill.

2. Assume that the company uses absorption costing. Prepare an income statement for last year.

Units in beginning inventory 0 Units produced 10,300 Units sold 9,100 Units in ending inventory 1,200 Variable costs per unit: Direct materials $ 65 Direct labor 39 Variable manufacturing overhead 10 Variable selling and administrative 19 Total variable cost per unit $ 133 Fixed costs: Fixed manufacturing overhead $ 329,600 Fixed selling and administrative 500,000 Total fixed costs $ 829,600

Explanation / Answer

1 Direct materials 65 Direct labor 39 Variable manufacturing overhead 10 Fixed manufacturing overhead 32 =329600/10300 Unit product cost 146 2 Sales 1911000 =9100*210 CosT of goods sold 1328600 =9100*146 Gross margin 582400 Selling and administrative expenses 672900 Net operating income(loss) -90500

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