Question
Jarvix Company, which has only one product, has provided the following data concerning its most recent month of operations: Selling Price $111 Units in Beginning
Jarvix Company, 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:
a) What is the value of ending inventory under absorption costing? Show calculation of Absorption cost per unit and how many units were left in ending inventory. (3 marks)
b) On the following page, Prepare an income statement for this month in good form using the contribution format and the variable costing method.
c) Use the Reconciliation format between the variable costing and absorption costing methods for this month to calculate the absorption costing operating income.Explain the differences in your reconciliation.
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