Question 1

SEGMENTED INCOME STATEMENTS, INVENTORY VALUATION (LO1 and 2)

For the coming year, Archway Computers Inc. expects to produce and sell 200,000 computers. Of these, 80,000 will be consumer (personal) computers and 120,000 will be small business computers. Common fixed overhead is $700,000. Additional information for the coming year is as follows:

Consumer Computers Small Business Computers

Price $780 $2,300

Unit Direct Materials 500 1,800

Unit Direct Labour 160 290

Unit Variable Overhead 40 75

Unit Variable Selling Expenses 75 70

Total Direct Fixed Overhead 120,000 200,000

Fixed selling and administrative expense for Archway Computers Inc. is $3,460,000 per year.

Required:

1. Calculate the unit variable cost under variable costing. Is this cost the same as unit variable product cost? Why or why not?

2. Prepare a segmented variable-costing income statement for next year. The segments correspond to product lines: consumer computers and small business computers.