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Exercise 6A-3 (20 minutes)
1 a. Under super-variable costing, the unit product cost for both years
includes direct materials of $12.
1 b.
Year 1
Year 2
Sales .........................................................
$2,000,000
$3,000,000
Variable cost of goods sold (@ $12 per unit)
480,000
720,000
Contribution margin ....................................
1,520,000
2,280,000
Fixed expenses:
Direct labor .............................................
500,000
500,000
Fixed manufacturing overhead ..................
450,000
450,000
Fixed selling and administrative ................
180,000
180,000
Total fixed expenses ...................................
1,130,000
1,130,000
Net operating income .................................
$ 390,000
$1,150,000
2 a. The unit product costs under variable costing:
Year 1
Year 2
Direct materials ....................................
$12
$12
Direct labor ..........................................
*10
*10
Variable costing unit product cost ..........
$22
$22
* $500,000 ÷ 50,000 units = $10 per unit.
Problem 6A-4 (30 minutes)
1 a. and b. The unit product cost for all three years under super-variable costing would include direct
materials of $16 per unit. The super-variable costing income statements appear below:
Year 1
Year 2
Year 3
Sales ........................................................................
$2,700,000
$2,475,000
$2,925,000
Variable cost of goods sold (@ $16 per unit) ..............
960,000
880,000
1,040,000
Contribution margin ..................................................
1,740,000
1,595,000
1,885,000
Fixed expenses:
Direct labor ............................................................
540,000
540,000
540,000
Fixed manufacturing overhead ................................
822,000
822,000
822,000
Fixed selling and administrative ...............................
370,000
370,000
370,000
Total fixed expenses .................................................
1,732,000
1,732,000
1,732,000
Net operating income (loss) ......................................
$ 8,000
$ (137,000)
$ 153,000
Problem 6A-4 (continued)
2 a. The unit product costs under variable costing:
Year 1
Year 2
Year 3
Direct materials ...........................................
$16
$16
$16
Direct labor* ...............................................
9
9
9
Variable costing unit product cost .................
$25
$25
$25
*Direct labor cost per unit for each year: $540,000 ÷ 60,000 units = $9.
2 b. The variable costing income statements appears below:
Year 1
Year 2
Year 3
Sales ........................................................................
$2,700,000
$2,475,000
$2,925,000
Variable cost of goods sold (@ $25 per unit) ..............
1,500,000
1,375,000
1,625,000
Contribution margin ..................................................
1,200,000
1,100,000
1,300,000
Fixed expenses:
Fixed manufacturing overhead ................................
822,000
822,000
822,000
Fixed selling and administrative ...............................
370,000
370,000
370,000
Total fixed expenses .................................................
1,192,000
1,192,000
1,192,000
Net operating income (loss) ......................................
$ 8,000
$ (92,000)
$ 108,000
Problem 6A-5 (continued)
Super-variable costing net operating income ............
$8,000
Add direct labor and fixed manufacturing overhead
cost deferred in inventory under absorption
costing ................................................................
55,000
Absorption costing net operating income .................
$63,000
