Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
Solutions Manual, Appendix 5A 69
Exercise 5A-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.
70 Managerial Accounting for Managers, 4th Edition
Exercise 5A-3 (continued)
2 b. The variable costing income statements would be:
Year 1
Year 2
Sales .........................................................
$2,000,000
$3,000,000
Variable cost of goods sold (@ $22 per unit)
880,000
1,320,000
Contribution margin ....................................
1,120,000
1,680,000
Fixed expenses:
Fixed manufacturing overhead ..................
450,000
450,000
Fixed selling and administrative ................
180,000
180,000
Total fixed expenses ...................................
630,000
630,000
Net operating income .................................
$ 490,000
$1,050,000
3. The net operating incomes are reconciled as follows:
Year 1
Year 2
Units in beginning inventory ........................
0
10,000
+ Units produced .......................................
50,000
50,000
− Units sold ...............................................
40,000
60,000
= Units in ending inventory .........................
10,000
0
Year 1
Year 2
Direct labor cost in ending inventory
(10,000 units × $10 per unit) ...................
$100,000
$ 0
− Direct labor cost in beginning inventory
(10,000 units × $10 per unit) ...................
100,000
= Direct labor cost deferred in (released
from) inventory........................................
$100,000
$(100,000)
Year 1
Year 2
Super-variable costing net operating income
$390,000
$1,150,000
Add: Direct labor deferred in inventory
under variable costing ..............................
100,000
Deduct: Direct labor released from
inventory under variable costing ...............
(100,000)
Variable costing net operating income .........
$490,000
$1,050,000
Solutions Manual, Appendix 5A 71
Problem 5A-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
72 Managerial Accounting for Managers, 4th Edition
Problem 5A-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
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
Solutions Manual, Appendix 5A 73
Problem 5A-4 (continued)
3. The net operating incomes are reconciled as follows:
Year 1
Year 2
Year 3
Units in beginning inventory ........................
0
0
5,000
+ Units produced .......................................
60,000
60,000
60,000
− Units sold ...............................................
60,000
55,000
65,000
= Units in ending inventory .........................
0
5,000
0
Year 1
Year 2
Year 3
Direct labor cost in ending inventory (5,000
units × $9 per unit) .................................
$ 0
$45,000
$ 0
− Direct labor cost in beginning inventory
(5,000 units × $9 per unit) .......................
0
45,000
= Direct labor cost deferred in (released
from) inventory........................................
$ 0
$45,000
$(45,000)
Year 1
Year 2
Year 3
Super-variable costing net operating income
(loss) ......................................................
$8,000
$(137,000)
$153,000
Add: Direct labor deferred in inventory
under variable costing ..............................
45,000
Deduct: Direct labor released from
inventory under variable costing ...............
(45,000)
Variable costing net operating income (loss)
$8,000
$ (92,000)
$108,000
74 Managerial Accounting for Managers, 4th Edition
Problem 5A-5 (45 minutes)
1. a. The unit product cost under super-variable costing would include
direct materials of $19.
b. The super-variable costing income statement would be:
Sales (18,000 units × $55 per unit) ............
$990,000
Variable cost of goods sold
(18,000 units × $19 per unit) ...............
342,000
Contribution margin ..................................
648,000
Fixed expenses:
Direct labor ............................................
$250,000
Fixed manufacturing overhead ................
300,000
Fixed selling and administrative expense ..
90,000
640,000
Net operating income ................................
$ 8,000
2. a. The unit product cost under variable costing would be:
Direct materials..............................................................
$19.00
Direct labor ($250,000 ÷ 20,000 units) ...........................
12.50
Variable costing unit product cost ....................................
$31.50
b. The variable costing income statement would be:
Sales (18,000 units × $55 per unit) ............
$990,000
Variable cost of goods sold
(18,000 units × $31.50 per unit)...........
567,000
Contribution margin ..................................
423,000
Fixed expenses:
Fixed manufacturing overhead ................
$300,000
Fixed selling and administrative expense ..
90,000
390,000
Net operating income ................................
$ 33,000
Solutions Manual, Appendix 5A 75
Problem 5A-5 (continued)
3. a. The unit product cost under absorption costing would be:
Direct materials..............................................................
$19.00
Direct labor ($250,000 ÷ 20,000 units) ...........................
12.50
Fixed manufacturing overhead ($300,000 ÷ 20,000 units)
15.00
Absorption costing unit product cost ...............................
$46.50
b. The absorption costing income statement would be:
Sales (18,000 units × $55 per unit) ...........................
$990,000
Cost of goods sold (18,000 units × $46.50 per unit)...
837,000
Gross margin ...........................................................
153,000
Selling and administrative expenses ..........................
90,000
Net operating income ...............................................
$ 63,000
Units in ending inventory = Units in beginning inventory + Units
= 2,000 units
Super-variable costing net operating income ............
$ 8,000
Add direct labor cost deferred in inventory under
variable costing ...................................................
25,000
Variable costing net operating income ......................
$33,000
Direct labor and fixed manufacturing overhead cost deferred in
76 Managerial Accounting for Managers, 4th Edition
Problem 5A-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
