Answer:
Instructions are below.
Step-by-step explanation:
Giving the following information:
Production= 400 units
direct materials= $14 per unit
direct labor= $27 per unit
variable manufacturing overhead= $10 per unit
total fixed manufacturing overhead costs= $4,000
variable selling and administrative costs= $9 per unit
total fixed selling and administrative costs= $3,200
The difference between the absorption costing and variable costing methods is that the last one includes the fixed manufacturing costs in the unitary product costs.
1) Absorption costing:
Unitary fixed overhead= 4,000/400= $10
Unitary product cost= 14 + 27 + (10 + 1)= $61
2) Variable costing:
Unit product cost= 14 + 27 + 10= $51
3) Absorption costing:
Sales= 1,800*100= 180,000
COGS= (61*1,800)= (109,800)
Gross profit= 70,200
Total selling and administrative costs= 3,200+ (9*1,800)= (19,400)
Net operating income= $50,800
4) Variable costing:
Sales= (1,900*100)= 190,000
Total variable cost= (60*1,900)= (114,000)
Contribution margin= 76,000
Fixed selling and administrative costs= (3,200)
total fixed manufacturing overhead costs= (4,000)
Net operating income= 68,800