Consider the following information for Presidio Inc.\'s most recent year of oper

Question

Consider the following information for Presidio Inc.'s most recent year of operations. Additional information for Presidio’s most recent year of operations follows: Number of units produced 2,900 Number of units sold 1,750 Unit sales price $ 680.00 Direct materials per unit 55.00 Direct labor per unit 85.00 Variable manufacturing overhead per unit 35.00 Fixed manufacturing overhead per unit ($343,360 ÷ 2,900 units) 118.40 Total variable selling expenses ($13 per unit sold) 22,750.00 Total fixed general and administrative expenses 79,000.00 Required: 2. Complete a full absorption costing income statement and a variable costing income statement for Presidio. Assume there was no beginning inventory. 3. Compute the difference in profit between full absorption costing and variable costing.

Explanation / Answer

2. Absorption costing income statement:

Working Note:

Cost per unit = Direct material per unit + Direct labor per unit + Variable manufacturing overhead per unit + fixed manufacturing overhead per unit

= 55 + 85 + 35 + 118.40 = $293.40

Variable costing income statement:

Working Note-

Cost per unit = Direct material per unit + Direct labor per unit + variable manufacturing overhead per unit

= 55 + 85 + 35 = $175

3. The difference in profit between full absorption costing and variable costing:

Particulars Amount $ Amount $ Sales (1,750*680) 1,190,000 Less: cost of goods sold manyfactured (2,900*293.4) 850,860 Cost of goods sold available for sale 850,860 Less: Ending inventory (1,150*293.4) (2900 - 1750) 337,410 513,450 Gross profit 676,550 Less: Selling and administrative expenses Fixed 79,000 Variable 22,750 101,750 Net operating income 574,800

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