9-47
9-41 (60 min.) Absorption, variable, and throughput costing; performance evaluation
(1) a. Absorption Costing with leased truck and salaried driver
April 2011
May 2011
June 2011
Revenuesa
Cost of goods sold
Beginning inventoryb
$ 0
$72,000
$ 540
$75,000
Variable manufacturing costsc
20,740
30,600
Allocated fixed manufacturing costsd
12,200
18,000
Cost of goods available for sale
32,940
49,140
Deduct ending inventorye
(540)
(15,390)
Adjustment for prod. vol. var.f
7,800 U
2,000 U
Cost of goods sold
40,200
35,750
Gross margin
31,800
39,250
Fixed administrative costs
28,000
28,000
Operating income
$ 3,800
$11,250
a$6.00 × 12,000, 12,500, 13,000
b Fixed overhead rate: $20,000 ÷ 20,000 practical capacity = $1.00/box; Cost per box: $1.20 + 0.35 + 0.15 + 1.00 = $2.70; Beginning inventory: $2.70 × 0;
c $1.70 × 12,200, 18,000, 9,000
e$2.70 × (12,200 – 12,000); $2.70 × (200 + 18,000 – 12,500); $2.70 × (5,700 + 9,000 – 13,000)
f $20,000 – 12,200; $20,000 – 18,000; $20,000 – 9,000
9-48
b. Absorption Costing with variable delivery service
April 2011
May 2011
June 2011
Revenuesa
Cost of goods sold
Beginning inventoryb
$ 0
$72,000
$ 570
$75,000
Variable manufacturing costsc
25,620
37,800
Allocated fixed manufacturing costsd
9,150
13,500
Cost of goods available for sale
34,770
51,870
Deduct ending inventorye
(570)
(16,245)
Adjustment for prod. vol. var.f
5,850 U
1,500 U
Cost of goods sold
40,050
37,125
Gross margin
31,950
37,875
Fixed administrative costs
28,000
28,000
Operating income
$ 3,950
$ 9,875
a$6.00 × 12,000, 12,500, 13,000
d $0.75 × 12,200, 18,000, 9,000
(2) a. Variable Costing with leased truck and salaried driver
April 2011
May 2011
June 2011
Revenuesa
$72,000
$75,000
$78,000
Variable costs
Beginning inventoryb
$ 0
$ 340
$ 9,690
Variable manufacturing costsc
20,740
30,600
15,300
Cost of goods available for sale
Deduct ending inventory
20,740
(340)
30,940
(9,690)
24,990
(2,890)
Variable cost of goods sold
20,400
21,250
22,100
Contribution margin
Fixed costs
Fixed manufacturing costsd
Fixed administrative costs
Total fixed costs
Operating income
20,000
28,000
51,600
48,000
$ 3,600
20,000
28,000
53,750
48,000
$ 5,750
20,000
28,000
55,900
48,000
$ 7,900
a $6 × 12,000, 12,500, 13,000
b $0; $1.70 × (0 + 12,200 – 12,000): $1.70 × (200 + 18,000 – 12,500)
c $1.70 × 12,200, 18,000, 9,000
d $15,000 + $5,000
b. Variable Costing with variable delivery servicea
April 2011
May 2011
June 2011
Revenues
$72,000
$75,000
$78,000
Variable costs
Beginning inventory
$ 0
$ 420
$ 11,970
Variable manufacturing costs
25,620
37,800
18,900
Cost of goods available for sale
Deduct ending inventory
25,620
(420)
38,220
(11,970)
30,870
(3,570)
Variable cost of goods sold
25,200
26,250
27,300
Contribution margin
Fixed costs
Fixed manufacturing costsd
Fixed administrative costs
Total fixed costs
Operating income
15,000
28,000
46,800
43,000
$ 3,800
15,000
28,000
48,750
43,000
$ 5,750
15,000
28,000
50,700
43,000
$ 7,700
a Variable cost per unit: $1.70 + $0.40 = $2.10
9-50
(3) a. Throughput costing with leased truck and salaried driver
April 2011
May 2011
June 2011
Revenues
Direct material cost of
goods sold
Beginning inventorya
$ 0
$72,000
$ 240
$75,000
$ 6,840
$78,000
Direct materials in goods
manufacturedb
Cost of goods available
for sale
Deduct ending inventoryc
Total direct material
cost of goods sold
14,640
14,640
(240)
14,400
21,600
21,840
(6,840)
15,000
10,800
17,640
(2,040)
15,600
Throughput margin
57,600
60,000
62,400
Other costs
Manufacturingd
Administrative
Total other costs
Operating income
26,100
28,000
54,100
$ 3,500
29,000
28,000
57,000
$ 3,000
24,500
28,000
52,500
$ 9,900
a $0; $1.20 × (0 + 12,200 – 12,000): $1.20 × (200 + 18,000 – 12,500)
b $1.20 × 12,200, 18,000, 9,000
9-51
b. Throughput costing with variable delivery service
April 2011
May 2011
June 2011
Revenues
Direct material cost of
goods sold
Beginning inventorya
$ 0
$72,000
$ 240
$75,000
$ 6,840
$78,000
Direct materials in goods
manufacturedb
Cost of goods available
for sale
Deduct ending inventoryc
Total direct material
cost of goods sold
14,640
14,640
(240)
14,400
21,600
21,840
(6,840)
15,000
10,800
17,640
(2,040)
15,600
Throughput margin
57,600
60,000
62,400
Other costs
Manufacturingd
Administrative
Total other costs
Operating income
25,980
28,000
53,980
$ 3,620
31,200
28,000
59,200
$ 800
23,100
28,000
51,100
$11,300
a $0; $1.20 × (0 + 12,200 – 12,000): $1.20 × (200 + 18,000 – 12,500)
b $1.20 × 12,200, 18,000, 9,000
9-52
4. Variable costing seems to be the best method to use in this situation, given that the
fluctuations in production are due to planning for actual needs and not due to irresponsible
buildup of inventories. Actual costs of the inventory produced are not fluctuating, and sales are
steadily increasing. Therefore, the method that reflects that steady increase in sales as a steady
5. Because the company is forecasting future growth, the leased truck and salaried driver seem
to be the best solution. By June, the total variable cost of the delivery service (based on sales