Quick Study 19-17 (10 minutes)
Per unit
Direct materials……………….…………………………………..…………………….….... $50
Direct labor………………..……………….………………..………………………..…..…... 12
Variable overhead…………………………….……………….…………….….….….……. 6
Quick Study 19-18 (10 minutes)
The suggested selling price for the special order ($68 per unit) exceeds the
EXERCISES
Exercise 19-1 (15 minutes)
Part 1
Cost per unit of finished goods using absorption costing:
Direct materials……………….……………………………….….….….….….…...$15 per unit
Direct labor………………..……………….………………..….….….….….….…...16 per unit
Part 2
Cost of ending finished goods inventory using absorption costing:
Part 3
Cost of goods sold using absorption costing:
Exercise 19-2 (15 minutes)
Part 1
Cost per unit of finished goods using variable costing:
Direct materials……………….……………………………….….….….….….…...$15 per unit
Direct labor………………..……………….………………..….….….….….….…...16 per unit
Exercise 19-2 (continued)
Part 2
Cost of ending finished goods inventory using variable costing:
Part 3
Cost of goods sold inventory using variable costing:
Exercise 19-3 (25 minutes)
Part 1
SIMS COMPANY
Variable Costing Income Statement
Sales (70,000 units x $350/unit)……………..………………..… $24,500,00
0
Variable expenses
Var. manuf. expense (70,000 units x 130/unit*)..…........$9,100,000
Var. selling and administrative expense…………………… 770,000
Total variable expenses…………………….…..….….….….…. 9,870,000
* Direct materials…………..…………….….…$ 40 per unit
Direct labor……………………………..…….. 60 per unit
Variable overhead……..…………………….. 30 per unit
Total variable manuf. cost….………………..$130 per unit
Exercise 19-3 (continued)
Part 2
SIMS COMPANY
Absorption Costing Income Statement
Sales (70,000 units x $350 per unit)……………….………………………....$24,500,000
Cost of goods sold (70,000 units x $200 per unit*)………….….….…. 14,000,000
Gross profit……………………………………………………………………..….…..10,500,000
Part 3
Exercise 19-4 (15 minutes)
Part 1
KENZI KAYAKING
Variable Costing Income Statement
Sales (800 x $1,050)……………….……………….………….….. $840,000
Variable expenses
Variable production costs (800 x $400)…..….…..….... $320,000
Variable selling and administrative expenses.......... 75,000
Total variable expenses……………..…..….…..….….….… 395,000
Contribution margin…………………………..……….…..….…. 445,000
Fixed expenses
`
Exercise 19-4 (continued)
Part 2
The absorption costing income is $25,000 higher than the variable costing
Exercise 19-5 (25 minutes)
a)
REY COMPANY
Absorption Costing Income Statement
Sales (20,000 units x $216 per unit)……………….………………………....$4,320,000
Cost of goods sold (20,000 units x $62 per unit*)………..….….….…. 1,240,000
Gross margin…………………………………………………….……..….….….….. 3,080,000
b)
REY COMPANY
Variable Costing Income Statement
Sales (20,000 units x $216/unit)……………..………………..… $4,320,000
Variable expenses
Var. manuf. expense (20,000 units x $54/unit*)..…........$1,080,000
Var. selling and administrative expense…………………… 360,000
Total variable expenses…………………….…..….….….….…. 1,440,000
Contribution margin………………………………..….….….….…. 2,880,000
Fixed expenses
Exercise 19-6 (15 minutes)
Part 1
HAYEK BIKES
Absorption Costing Income Statement
Sales (225 units x $1,600 per unit)…………………………………….….…..….…..$360,000
Cost of goods sold (225 units x $775 per unit*)……………..………………….. 174,375
* Production cost per unit:
Variable production costs………………………………..….$625
Fixed overhead ($56,250 / 375 units)………..……...…… 150
Total production costs………………………………………....$775
Part 2
The absorption costing income is $22,500 ($96,000 – $73,500) higher than
Exercise 19-7 (25 minutes)
Part 1
OAK MART COMPANY
Variable Costing Income Statement
Sales (118,000 units x $320 per unit)………….…..….…... $37,760,000
Variable expenses
Variable production costs*……………..….…..….….….….$15,355,000
Variable selling and administrative expenses........... 1,416,000
Fixed expenses
Fixed manufacturing costs………………..…………….…...7,400,000
Fixed selling and administrative expenses……….…… 4,600,000
*Beginning variable finished goods……....……….…..….$ 405,000
Variable cost of goods manufactured
Direct materials ($40 x 115,000)……………….……..……..4,600,000
Direct labor ($62 x 115,000)…………..…………..…………..7,130,000
Exercise 19-7 (concluded)
Part 2
OAK MART COMPANY
Absorption Costing Income Statement
Sales (118,000 units x $320 per unit)………….…..….…... $37,760,000
Cost of goods sold
Beginning finished goods……………………….…………….$ 645,000
Cost of goods manufactured *………….….…..….….…... 22,350,000
Goods available for sale…………….….….….…..….….…..22,995,000
Less ending finished goods **…………….…..….….….… 0
* Direct materials ($40 x 115,000)…...…. $ 4,600,000
Direct labor ($62 x 115,000)
………………………………..…….…….……..
7,130,000
Variable overhead
………………………………..…….…….……..
3,220,000
Fixed overhead
………………………………..…….…….……..
7,400,000
………………………………..…….…….……..
Ending finished goods inventory
………………………………..…….…….……..
0 units
***$1,416,000 + $4,600,000 = $6,016,000
Part 3
Variable costing income is $240,000 ($8,989,000 – $8,749,000) higher than
the absorption costing income. This is equal to the $240,000 of fixed
incurred this period.
Exercise 19-8 (20 minutes)
Part 1
POLARIX
Income Statement—Consumer ATV Department
For Year Ended December 31, 2015
Sales……………..………………………………..…………………………….. $646,000
Variable expenses
Cost of goods sold (170 ATVs* × $1,830 per ATV) $311,100
Selling expenses (170 ATVs × $270 per ATV) 45,900
Administrative expenses (40% × $59,500) 23,800 380,800
*$646,000 sales ÷ $3,800 sales price per unit = 170 ATVs.