Only 3 and 4 Advance Products, Inc., has just organized a new division to manufacture and sell specially designed bookshelves using select hardwoods for personal computers. The division’s monthly costs are shown in the schedule below: Manufacturing costs: Variable costs per unit: Direct materials .......................................... $172 Variable manufacturing overhead ............... $8 Fixed manufacturing overhead costs (total) ... $240,000 Selling and administrative costs: Variable .......................................................... 20% of sales Fixed (total) .................................................... $300,000 Advance Products regards all of its workers as full-time employees and the company has a long-standing no-layoff policy. Furthermore, production is highly automated. Accordingly, the company includes its labor costs in its fixed manufacturing overhead. The bookshelf sell for $600 each. During the first month of operations, the following activity was recorded: Units produced ................... 4,000 Units sold ............................ 3,000 1. Compute the unit product cost under: a. Absorption costing. b. Variable costing. 2. Prepare an income statement for the month using absorption costing. 3. Prepare a contribution format income statement for the month using variable costing. 4. Reconcile the absorption costing and variable costing net operating incomes in (2) and (3) above.
Only 3 and 4
Advance Products, Inc., has just organized a new division to manufacture and sell specially designed bookshelves using select hardwoods for personal computers. The division’s monthly costs are shown in the schedule below:
Variable costs per unit:
Direct materials .......................................... $172
Variable manufacturing overhead ............... $8
Fixed manufacturing overhead costs (total) ... $240,000 Selling and administrative costs:
Variable .......................................................... 20% of sales Fixed (total) .................................................... $300,000
Advance Products regards all of its workers as full-time employees and the company has a long-standing no-layoff policy. Furthermore, production is highly automated. Accordingly, the company includes its labor costs in its fixed manufacturing overhead. The bookshelf sell for $600 each.
During the first month of operations, the following activity was recorded: Units produced ................... 4,000
Units sold ............................ 3,000
1. Compute the unit product cost under:
a. Absorption costing.
b. Variable costing.
2. Prepare an income statement for the month using absorption costing.
3. Prepare a contribution format income statement for the month using variable costing.
4. Reconcile the absorption costing and variable costing net operating incomes in (2) and (3) above.
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