GI X EF 4 11 B @ 1 Question 2 - Variable Costing (12 marks total) D 2 Algoma Inc. provided two years' worth of income statements, presented below: 3 Algoma Inc. Traditional Income Statement 5 Year 1 Year 2 6 Sales $ 312,000 $ 416,000 7 Cost of Goods Sold 8 Beginning inventory 27,300 13,650 9 Add: Cost of Goods Manufactured 191,100 191,100 10 Goods available for sale 218,400 204,750 Less: Ending inventory 13,650 40,950 12 Cost of Goods Sold 204,750 163,800 13 Gross margin 107,250 252,200 4 Selling and administrative expenses 123,500 111,800 15 Operating income $ (16,250) $ 140,400 16 7 Other information Year 1 Year 2 18 $ Direct material per unit 2.60 2.60 $ 9 $ Variable Selling & Admin costs per unit 3.90 3.90 $ CO $ 3.90 Direct labour per unit 3.90 $ $ 72,800 Fixed manufacturing overhead 72,800 $ 1 # ABC costing #2 Variable costing - Budgeting 4 Segment Reporting #5 Relevant Costing G51 X fix D E F A B 77 Other information Year 1 Year 2 18 Direct material per unit $ 2.60 $ 2.60 19 Variable Selling & Admin costs per unit $ 3.90 $ 3.90 20 Direct labour per unit $ 3.90 $ 3.90 21 Fixed manufacturing overhead $ 72,800 $ 72,800 22 Variable Manufacturing overhead per unit $ 1.95 $ 1.95 23 24 Year 1 Year 2 25 Units in beginning inventory 2,600 1,300 26 Units produced 18,200 18,200 27 Units sold 19,500 15,600 28 29 Required: 30 a) Using variable costing, calculate the unit product cost for both years. (2 marks) Year 1 Year 2 31 32 BB 34 35 36 Total unit product cost 37 + Relevant Costim - Budgeting #4 Segment Reporting =\ ABC costing 2 Variable costing Chipboard Font 15 Alignment Number G51 X fo B C D E F 38 39 40 b) Prepare new variable costing income statements. (4 marks) Algoma Inc. Variable Costing Income Statement Year 1 Sales Less: Variable expenses 41 Year 2 42 43 44 45 46 47 48 49 50 51 Contribution margin 52 53 54 55 Operating income (loss) 56 57 c) Reconcile operating income under variable costing to the operating income under absorption costing. (6 marks) Year 1 Year 2 58 24 Segment Reporting #5 Relevant costing 8 Budgeting ABC Casting 2 Variable costing Meige & Center - Clipboard $ - % 9-3 Font 15 Alignment GS1 Number fo A B C 50 D E F Contribution margin 51 52 53 54 55 Operating income (loss) 56 57 58 69 c) Reconcile operating income under variable costing to the operating income under absorption costing. (6 marks) Year 1 Year 2 Variable costing operating income 0 1 2 Absorption costing operating income 3 4 5 6 7 9 0 5 Relevant Casting hosting Budgeting 4 Segment Reporting
