On September 30, the end of the first month of operations, Bret Company. prepare

Question

On September 30, the end of the first month of operations, Bret Company. prepared the following income statement based on absorption costing 4. Bret Company Absorption Costing Income Statement For Month Ended September 30, 2018 S117,000 Sales (2,600 units) Cost of goods sold $85,500 11400 Cost of goods manufactured Less ending inventory (400 units) 74.100 $42,900 21.500 $21,400 Cost of goods sold Gross Profit Selling and administrative expenses Operating income Assume that fixed manufacturing costs were $42,900 and the variable selling and administrative expenses were $14,600 Required a. How many units were produced in September? b. What is the inventory cost per u b. What is the inventory cost per unit using the variable costing method? c. Prepare an income statement using variable costing. nit using the absorption costing method?

Explanation / Answer

a) Number of units produced in september = 2600+400 = 3000 units

b) Inventory cost per unit using absorption costing method = 11400/400 = 28.5 per unit

c) Inventory cost per unit using variable costing method = (85500-42900)/3000 = 14.2 per unit

d) Prepare variable costing income statement :

Sales 117000 Less: Variable cost of goods sold (85500-42900*2600/3000) (36920) Less: Variable selling and administrative expense (14600) Total variable expenses (51520) Contribution margin 65480 Less: Fixed manufacturing costs (42900) Less: Fixed selling and administrative expense (6900) Total fixed expenses (49800) Operating income 15680

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