Information for Sponge-Fun Products is provided in P8-36B.
In P8-36B
SpongeFun Products manufactures and sells a variety of swimming products. Recently, the company opened a new plant to manufacture a lightweight, inflatable boat. Cost and sales data for 2012 are shown below:
Manufacturing costs
Fixed overhead costs ............................................... $150,000
Variable overhead ................................................ $5 per boat
Direct labour ..................................................... $10 per boat
Direct materials .................................................. $10 per boat
Beginning inventory ................................................... 0 boats
Boats produced ......................................................... 50,000
Boats sold ................................................................ 46,000
Selling and administrative costs
Fixed ................................................................... $300,000
Variable ......................................................... $8 per boat sold
Instructions
(a) Assume the company uses normal costing and uses the budgeted volume of 60,000 units to allocate the fixed overhead rate rather than the actual production volume of 50,000 units. The company expenses production volume variance to cost of goods sold in the accounting period in which it occurs. Do the following:
1. Calculate the manufacturing cost per unit.
2. Prepare a normal-costing income statement for 2012.
(b) Reconcile the difference in net income between the absorption-costing and normal-costing methods.