Question

Chuck Wagon Grills, Inc., makes a single product—a handmade specialty barbecue grill that it sells for $215. Data for last year’s operations follow: Units in beginning inventory 0 Units produced 9,800 Units sold 9,300 Units in ending inventory 500 Variable costs per unit: Direct materials $ 61 Direct labor 33 Variable manufacturing overhead 10 Variable selling and administrative 15 Total variable cost per unit $ 119 Fixed costs: Fixed manufacturing overhead $ 274,400 Fixed selling and administrative 510,000 Total fixed costs $ 784,400 Required: 1. Assume that the company uses absorption costing. Compute the unit product cost for one barbecue grill. 2. Assume that the company uses absorption costing. Prepare an income statement for last year.

Answer 1

The unit product cost using absorption costing is $199. The income statement shows a total sales revenue of $2,000,950, a total cost of goods sold of $1,846,700, and operating income of $154,250.

Step-by-step explanation:

To calculate the unit product cost using absorption costing, we need to consider the fixed manufacturing overhead as well. The fixed costs are $784,400 and the number of units produced is 9,800. So, the fixed manufacturing overhead per unit is $784,400 / 9,800 = $80. The unit product cost is the sum of all variable costs per unit and the fixed manufacturing overhead per unit, which is $119 + $80 = $199.

To prepare an income statement, we need to compute the total sales revenue, total cost of goods sold, and the operating income. Total sales revenue is the selling price per unit ($215) multiplied by the number of units sold (9,300), which is $2,000,950. Total cost of goods sold is the sum of the unit product cost ($199) multiplied by the number of units sold (9,300), which is $1,846,700. Operating income is the difference between total sales revenue and total cost of goods sold, which is $2,000,950 - $1,846,700 = $154,250.

Answer 2

Instructions are listed below

Step-by-step explanation:

Giving the following information:

Selling price= $215

Units in beginning inventory 0

Units produced 9,800

Units sold 9,300

Units in ending inventory 500

Variable costs per unit:

Direct materials $ 61

Direct labor 33

Variable manufacturing overhead 10

Variable selling and administrative 15

Total variable cost per unit $ 119

Fixed costs:

Fixed manufacturing overhead $ 274,400

Fixed selling and administrative 510,000

Total fixed costs $ 784,400

Absorption costing includes fixed manufacturing overhead in the cost per unit.

A) Unitary fixed manufacturing overhead= 274,400/9800 units= $28

Unitary cost= Direct materials + Direct labor + Variable manufacturing overhead + fixed manufacturing overhead

Unitary cost= 61 + 33 + 10 + 28= $132

B) Income statement:

Sales= 9300*215= $1,999,500

COGS= 132*9300=$1,227,600

Gross profit= $771,900

Total selling and administrative expense= 510,000 + 15*9300= 649,500

Net operating income= $122,400