2-48. Components of Full Costs Larcker Manufacturing\'s cost accountant has prov

Question

2-48. Components of Full Costs Larcker Manufacturing's cost accountant has provided you with the following information for January operations: (LO 2-6) Direct Fixed manufacturing overhead costs . $21 $135,000 Variable manufacturing overhead . . . . . .. . . . . . . .. .. $12 per unit Direct labor . . . . . . . . . . . . . . . . $24 per unit Fixed marketing and administrative costs....... $117,000 30,000 $5 per unit Variable marketing and administrative costs........ Required Determine each of the following: a. Variable cost. b. Variable manufacturing cost. c Full absorption cost. d. Full cost. e. Profit margin. f Gross margin. g Contribution margin

Explanation / Answer

Solution : All amounts in Dollars

PLease see the below table and see the amounts derived :

a. Variable cost = Direct Material + Direct Labour + Variable Manufacturing cost +variable marketing and admin cost = ( 21+24+12+5) i.e. 62 * 30,000 = 1,860,000.

B. Variable Manufacturing Cost : Direct Material + Direct Labour + Variable Manufacturing cost = 1,710,000.

C. Full absoprtion cost : All production costs = Direct Material + Direct Labour + total Manufacturing ovrhead = 1,845,000 .

D. Full Cost = Full Absorption cost + total Marketing and admin cost = 1,845,000 +267,000 = 2,112,000

E . Profit Margin = Total sales less full cost = (79*30,000 - 2,112,000) = 258,000

F . Gross Margin = Total sales less full absorption cost = 2370,000 -1,845,000 = 525,000

G. Contribution Margin : Contribution is Sales less Variable cost = 2,370,000- 1,860,000 = 510,000

Contribution Margin = Contribution/Sales * 100 = 510,000/2,370,000*100 = 21.52%

Calcualtion chart :

Statement showing proift and loss for January month Sales Revenue (79*30,000)                2,370,000 Prodcution Costs Direct Materials (21*30000)          630,000 Direct Labour (24*30000)          720,000 Manufacturing Overhead Variable (12*30000)          360,000 Fixed          135,000                1,845,000 Gross Margin                    525,000 Marketing and Admin costs Variable (5*30000)          150,000 Fixed          117,000                    267,000 Profit Margin                    258,000

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