Emerson Corporation just completed its first year of operations. Planned and actual production equaled 10,000 units, and sales totaled 9,600 units at $72 per unit. Cost data for the year are as follows:

Required:
1. Compute the company’s total cost for the year assuming that variable manufacturing costs are driven by the number of units produced, and variable selling and administrative costs are driven by the number of units sold.
2. How much of this cost would be held in year-end inventory under

(a) absorption costing and (b)
variable costing?
3. How much of the company’s total cost for the year would be included as an expense on the period’s income statement under

(a) absorption costing and

(b) variable costing?
4. Build a spreadsheet: Construct an Excel spreadsheet to solve requirements (1) and (2) above.
Show how the solution will change if the following information changes: the direct-material cost is $11 per unit, and the total direct-labor cost is $46,000.

Transcribed Image Text:

Direct material (per unit) Conversion cost: Direct labor Variable manufacturing overhead Fixed manufacturing overhead. Selling and administrative costs: Variable (per unit) Fixed $12 45,000 65,000 220,000 8 118,000