Abdurehman Ullah Khan (40931)

ASSIGNMENT NO # 02

DATA:
 Beginning Inventory 0
 Expected sales in Units $20,000
 Selling price per Unit $ 15
 Variable Manufacturing cost per Unit $ 6
 Fixed Manufacturing Overhead Cost (Total) $60,000

 Fixed Manufacturing Overhead Cost per unit:

 Based on 20,000 units (60,000/20,000 units) $3 per unit
 Based on 30,000 units (60,000/30,000 units) $2 per unit

 Total Manufacturing Cost Per Unit:

 Based on 20,000 units ($6 + $3) $9 per unit
 Based on 30,000 units ($6 + $2) $8 per unit
 Variable selling and Administrative expenses per unit $ 1
 Fixed selling and Administrative expenses $15,000
Decision: Produce 20,000 or 30,000 per units?
 20,000:

 Ending Inventory:

Working:
Produced 20,000
Sold (20,000)
Ending Units 0

 Unit Product Cost Under Absorption Costing:

 Variable MOH 6
Fixed MOH (60,000/20,000) 3
Unit Product Cost (Absorption) 9

INCOME STATEMENT (ABSORPTION)

Sales (20,000*15) 300,000

Less: COGS:
Beginning Inventory 0
Add: COGM (20,000*9) 180,000
Goods available for sale 180,000
Less: Ending Inventory (0)
Cost of Goods Sold (180,000)
Gross Margin 120,000

Less: Operating expenses

Fixed selling and Administrative expenses 15,000
Variable selling and Administrative expenses (20,000*1) 20,000
Total operating expenses (35,000)
Net Profit 85,000

 Unit Product Cost Under Variable Costing:

Variable MOH $6
Unit Product Cost (Variable) $6
 INCOME STATEMENT (VARIABLE)

Sales (20,000*15) 300,000

Less: COGS
Beginning Inventory 0
Add: COGM (20,000*6) 120,000
Goods available for sale 120,000
Ending Inventory 0
Cost of Goods Sold (120,000)
Gross Margin 180,000
Variable Selling and Administrative expenses (20,000*1) (20,000)
Contribution Margin 160,000

Less: Fixed Expenses

Fixed MOH 60,000
Fixed selling and Administrative expenses 15,000
Total fixed expenses (75,000)
Net Profit 85,000
 30,000:

 Ending Inventory:

Produced 30,000
Sold (20,000)
Ending Inventory 10,000
  Unit Product Cost Under Absorption Costing:

Variable MOH 6
Fixed MOH (60,000/30,000) 2
Unit Product Cost (Absorption) 8

INCOME STATEMENT (ABSORPTION)

Sales (20,000*15) 300,000

Less: COGS
Beginning Inventory 0
Add: COGM (30,000*8) 240,000
Goods available for sale 240,000
Ending Inventory (10,000*8) (80,000)
Cost of Goods Sold (160,000)
Gross Margin 140,000

Less: Operating Expenses

Fixed selling and Administrative expenses 15,000
Variable selling and Administrative expenses (20,000*1) 20,000
Total operating expenses (35,000)
Net Profit 105,000
  Unit Product Cost Under Variable Costing:

Variable MOH $6
Unit Product Cost (Variable) $6

INCOME STATEMENT (VARIABLE)

Sales (20,000*15) 300,000

Less: COGS
Beginning Inventory 0
Add: COGM (30,000*6) 180,000
Goods available for sale 180,000
Ending Inventory (60,000)
Cost of Goods Sold (120,000)
Gross Margin1 80,000
Less: Variable selling and Administrative Expenses (20,000*1) (20,000)
Contribution Margin 160,000

Less: Fixed Expenses

Fixed MOH 60,000
Fixed selling and Administrative expenses 15,000
Total fixed expenses (75,000)
Net Profit 85,000