Problem 7-12 comprehensive problem with Labor Fixed [LO1, LO2,LO3,LO4]
Advance Products, Inc., has just organized a new division to manufacture and sell specially designed tables using select hardwoods for personal computers. The division’s monthly costs are shown in the schedules below:
Manufacturing costs:
Variable costs per unit
Direct materials $86
Variable manufacturing overhead $4
Fixed manufacturing overhead costs(total) $240,000
Selling and administrative costs
Variable 15% of sales
Fixed (Total) $160,000
Advance Products regards all of its workers as full-time employees and the company has a longstanding no-layoff policy. Furthermore, production is highly automated. Accordingly, the company includes its labor costs in its fixed manufacturing overhead. The following activity was recorded:
Units produced 4,000
Units sold 3,200
Requirement 1
(a) compute the unit product cost under absorption costing. (Omit the “$” sign in your response.)
Unit product cost $_________________
(b) Compute the unit product cost under Variable costing.(Omit the “$” sign in your resonse)
Unit product cost $______________
Requirement 2:
Prepare an income statement for the month using absorption costing. (Leave no cells blank – be certain to enter “0” whenever required. Omit “$” sign in your response.)
Absorption costing income statement
_________________ $___________
Cost of goods sold
_________________ $_________________
_________________ __________________
___________ __________________
Requirement 3
Prepare a contribution format income statement for the month using variable costing.(Input all amounts as positive values. Leave no cell blank-be certain to enter “0” whenever required. Omit the “#” sign in your response.)
Variable costing income statement
______________ $____________
Variable expenses:
Variable cost of goods sold
__________ $____________
__________ _____________
Variable cost of goods sold _______
_____________ _________________________________
Fixed expenses _____________
____________ _________
______________ ___________________________
_______ $__________________________
Requirement 4
Assume that the company must obtain additional financing. As a member of top management, which of the statements that you have prepared in (2) and (3) above would you prefer to take with you as you negotiation with the bank?
(a) Absorption costing statement
(b) Variable costing statement
Requirement 5reconcile the absorption costing and variable costing net operating income figures in (2) and (3) above. (input all amounts as positive values. Omit the “$” sign in your response.)
___________ $_______________
___________: Fixed manufacturing overhead cost deferred ________________
___________ $_______________
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