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
$12
$12
*10
*10
$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