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Selling 140 Units in Beginning inventory 0 Units produced 1200 Units Sold 800 Units in ending...

Question:

Selling 140

Units in Beginning inventory 0

Units produced 1200

Units Sold 800

Units in ending inventory 400

Variable cost per unit

DM 25

DL 41

VMO 6

Variable selling and administrative 6

Fixed cost

Fixed manufacturing overhead 24000

What is net operating for the month under variable costing?

A 21600

B (15200)

C 8000

D 13600

What is net operating income for the month under absorption costing?

A 21600

B (15200)

C 8000

D 13600

Variable Costing:

The cost used for assigning the variable cost to the inventory is known as variable costing. Variable Costing used includes two heads product cost and period cost.

Product cost calculated by adding Direct material, Direct Labor, Variable Manufacturing Overhead

Period Cost calculated by adding Fixed Manufacturing Overhead, Selling Overhead.

Answer and Explanation:

a)

Under Variable Costing
Rate per unit Unit Total
Sales 140 800 112000
Less:
Variable cost of good sold
Unit Produced Rate Amount
Produced 1200 72 86400
Closing Inventory 400 72 28800
Variable  Cost of Good Sold 57600 57600
Contribution 54,400
Variable Selling 800 6 4800
Contribution Margin 49600
Less: Fixed Cosst
24000
12000 36000
Net Operating Income 13600

(Correct Answer_D)

b)

Under Absorption Costing
Rate per unit Unit Total
Sales 140 800 112000
Less:
Variable cost of good sold
Unit Produced Rate Amount
Produced 1200 92 110400
Closing Inventory 400 92 36800
Variable  Cost of Good Sold 73600 73600
Contribution 38,400
Variable Selling 800 6 4800
Contribution Margin 33600
Less: Fixed Cosst
12000
Net Operating Income 21600

(Correct Answer_a)


Learn more about this topic:

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Variable Costing: Method, Formula & Advantages

from Financial Accounting: Help and Review

Chapter 13 / Lesson 5
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