Chapter 8 Maloner Inc. produces and sells a unique type of case for a standard laptop computer that is guaranteed waterproof but still allows for regular functionality of the laptop. The company has just opened up a new plant to manufacture these cases, and the following cost and revenue data have been provided for the first two months of the plant's operation: APRIL MAY Units sold 16,000 14,000 Sales price per unit $55 S57 Units produced 18.000 13,000 Direct material cost per unit $10 S11 Direct labour cost per unit $7 $6 Variable overhead cost per unit $5 Following is the absorption costing income statement for May 2021 Maloner Inc Income Statement For the Month Ended May 31, 2021 Sales $798,000 $48,000 $364.000 $412,000 Cost of goods sold: Opening inventory Cost of goods manufactured Cost of goods available Ending Inventory Cost of goods sold Gross profit Selling and administrative expenses Operating income ($28,000) ($384.000 S414,000 (S78.84.0) $335,160 The variable selling and administrative experises are 6% of sales revenue in April, and 8% of sales revenue in May. Fixed selling and administrative experises are budgeted to be constant at $15,000 cach month. The fixed manufacturing overhead costs are $36.000 in April and $39,000 in May. The FIFO inventory system is used. REQUIRED 1. Calculate the unit cost of production for each month using absorption costing and then using variable costing. (4 marks) 2. Prepare an income statement for the month of May 2021 using variable costing (10 marks) 3. Reconcile the operating Income from the variable income statement to that from the absorption Income statement. (4 marks) 4 The assistant management accountant was enquiring why you prepared a variable costing Income statement. Briefly explain TWO advantages of using this format for a manufacturing company. (2 marks) Chapter 8 Maloner Inc. produces and sells a unique type of case for a standard laptop computer that is guaranteed waterproof but still allows for regular functionality of the laptop. The company has just opened up a new plant to manufacture these cases, and the following cost and revenue data have been provided for the first two months of the plant's operation: APRIL MAY Units sold 16,000 14,000 Sales price per unit $55 $57 Units produced 18,000 13.000 Direct material cost per unit $10 $11 Direct labour cost per unit 57 $6 Variable overhead cost per unit 55 $8 $798,000 Following is the absorption costing income statement for May 2021: Maloner Inc Income Statement For the Month Ended May 31, 2021 Sales Cost of goods sold: Opening inventory $48.000 Cost of goods manufactured Cost of goods available $412,000 Ending Inventory 1$28.000) Coat of goods sold Gross profit Selling and administrative expenses Operating income (5384,000) $414,000 JAZA 840) $335,160 $ The variable selling and administrative expenses are 6% of sales revenue In April, and 8% of sales revenue In May. Fixed sellng and administrative expenses are budgeted to be constant at $15,000 each month. The fixed manufacturing overhead costs are $36,000 in April and $39,000 in May. The FIFO inventory system is used. REQUIRED: 1. Calculate the unit cost of production for each month using absorption costing and then using variable costing. (4 marks) 2. Prepare an Income statement for the month of May 2021 wsing variable costing (10 marks) 3. Reconcile the operating income from the variable income statement to that from the absorption income statement. (4 marks) 1. The assistant management accountant was enquiring why you prepared a variable costing income statement. Briefly explain TWO advantages of using this format for a manufacturing company. (2 marks)
