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  • Exercise 7

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    shashu@smile
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    This document provides an example of absorption costing and an income statement. For absorption costing, the total variable manufacturing cost is $150 per unit which includes $50 of direct material, $80 of direct labor, and $20 of variable overhead. With fixed overhead of $35 per unit, the total unit product cost is $185. The income statement shows sales of $3,990,000 for 19,000 units sold at $210 each. Cost of goods sold is $3,515,000 which is calculated by multiplying production of 20,000 units by the unit product cost of $185, then subtracting ending inventory of 1,000 units valued at $185,000. This results in a gross margin of

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    This document provides an example of absorption costing and an income statement. For absorption costing, the total variable manufacturing cost is $150 per unit which includes $50 of direct material, $80 of direct labor, and $20 of variable overhead. With fixed overhead of $35 per unit, the total unit product cost is $185. The income statement shows sales of $3,990,000 for 19,000 units sold at $210 each. Cost of goods sold is $3,515,000 which is calculated by multiplying production of 20,000 units by the unit product cost of $185, then subtracting ending inventory of 1,000 units valued at $185,000. This results in a gross margin of

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    42 views1 page

    Exercise 7

    Uploaded by

    shashu@smile
    This document provides an example of absorption costing and an income statement. For absorption costing, the total variable manufacturing cost is $150 per unit which includes $50 of direct material, $80 of direct labor, and $20 of variable overhead. With fixed overhead of $35 per unit, the total unit product cost is $185. The income statement shows sales of $3,990,000 for 19,000 units sold at $210 each. Cost of goods sold is $3,515,000 which is calculated by multiplying production of 20,000 units by the unit product cost of $185, then subtracting ending inventory of 1,000 units valued at $185,000. This results in a gross margin of

    Copyright:

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    of 1

    EXERCISE 7-6

    1) Absorption costing:

    Direct material 50
    Direct labor 80
    Variable manufacturing overhead 20
    _______
    Total variable manufacturing cost 150
    Fixed manufacturing overhead (700000/20000) __35___
    Unit product cost _$185____

    2) Income statement:

    Selling (19000x210) 3 990 000


    Cost of goods sold:
    Beginning inventory 0
    (+) cost of goods manufactured
    (20000 x 185) 3 700 000
    Goods available for sale 3 700 000
    (-) ending inventory (1000x185) 185 000
    Cost of goods sold 3 515 000
    Gross margin __475 000

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