Variable (Direct) and Absorption (Full) Costing 1. Prepare income statements und

Question

Variable (Direct) and Absorption (Full) Costing

1. Prepare income statements under absorption (full) and variable (direct) costing using the following data:

                                                              Standard Per Unit

Direct materials                                         25

Direct labor                                                15

Factory overhead

Variable                                                   9

Fixed                                                      5 (based on normal capacity/expected volume of 10,000 units)

Selling price per unit is $ 250 per unit

Beginning inventory is 1000 units

Produced 12,000 units

Sold 9000 units

General and Administrative fixed cost is $ 200,000

Variable standard for selling expense is $ 5.00 per unit

In addition, show your reconciliations of the net incomes.

Explanation / Answer

Closing inventory = Opening Inventory + Produced - sales

= 1000+12000-9000 = 4000

Manufacturing Expenses per unit

Direct Expenses 25

Direct Labour 15

variable over head 9

Fixed over head (50000/12000) 4.17

Total 25+15+9+4.17 = 53.17

Absorption Costing Sales 2250000 Opening inventory 1000*53.17 53170 Add. Cost of goods produced 12000*53.17 638000 less Closing Invetory 4000*53.17 212680 478490 Gross Profit 1771510 less General administrative variable 9000*5 45000 Fixed General administration 200000 245000 Net profit 1526510

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