Reference no: EM131790439

Assignment

Question 1:

Required:

1. What is the basic difference between absorption costing and variable costing?

Question 2:

Refined Elegance Corp. makes a desk specially designed for personal computers. The desk sells for $200.

Data for last year's operations follow:

Units in beginning inventory	0
Units produced	10,000
Units sold	9,000
Units in ending inventory	1,000
Variable costs per unit:
Direct materials	$   40
Direct labour	35
Variable manufacturing overhead	10
Variable selling and administrative	25
Total variable cost per unit	$  110
Fixed costs:
Fixed manufacturing overhead	$300,000
Fixed selling and administrative	450,000
Total fixed costs	$750,000

Required:

1. Assume that the company uses variable costing. Compute the unit product cost for one computer desk.
2. Assume that the company uses variable costing. Prepare a contribution format income statement for the year.
3. What is the company's break-even point in terms of units sold?

Question 3:

Refer to the data in the previous question for Refined Elegance Corp. Assume in this exercise that the company uses absorption costing.

Required:

1. Compute the unit product cost for one computer desk.
2. Prepare an income statement for the year.

Question 4:

The following information pertains to Death Star Corporation for a period:

Selling price per unit	$41
Standard fixed manufacturing costs per unit	$20
Variable selling and administrative costs per unit	$4
Fixed selling and administrative cost per unit	$16,000
Beginning inventories:
Units	?
Standard fixed manufacturing cost	$40,000
Standard variable manufacturing cost	$20,000
Units produced	10,000
Units sold	9,600

Required:

1. Assume the unit standard costs data for the beginning and ending inventories remained constant during the period. What was the total standard cost of the ending inventory under absorption costing?

Question 5:

Algonquin Outfitters Corporation, which has only one product, has provided the following data concerning its most recent month of operations:

Selling price	$111
Units in beginning inventory	400
Units produced	8,800
Units sold	8,900
Variable costs per unit:
Direct materials	$34
Direct labour	$37
Variable manufacturing overhead	$3
Variable selling and administrative	$9
Fixed costs:
Fixed manufacturing overhead	$61,600
Fixed selling and administrative	$169,100

The company produces the same number of units every month, although the sales in units vary from month to month. The company's variable costs per unit and total fixed costs have been constant from month to month.

Required:

1. Compute the total Contribution Margin.
2. Compute the Operating Income under Variable Costing.
3. Prepare a reconciliation from your Variable Costing Operating Income to compute Operating Income under absorption costing.