Question
Sunland Manufacturing produces basketballs used for indoor and outdoor games. The company has had significant troubles over the past few years, as the number of
Sunland Manufacturing produces basketballs used for indoor and outdoor games. The company has had significant troubles over the past few years, as the number of competitors in the basketball market has increased dramatically. Recently, the company was forced to cut back production in order to reduce its rising inventory level. The following is a list of costs for the company in 2022:
Variable costs per unit | |||
Rubber | $2.75 | ||
Other materials—indirect | 1.40 | ||
Ball makers—direct labour | 5.60 | ||
Factory electricity usage | 0.40 | ||
Factory water usage | 0.15 | ||
Other labour—indirect | 0.26 | ||
Selling and administrative expenses | 0.40 | ||
Fixed costs per year | |||
Factory property taxes | $128,325 | ||
Factory sewer usage | 53,500 | ||
Factory electricity usage | 42,800 | ||
Selling and administrative expenses | 88,810 |
Sunland Manufacturing had an ending inventory of 90,950 basketballs in 2021. For these units, the fixed manufacturing overhead cost was $4.00 per unit and variable manufacturing costs were $9.60 per unit. In 2022, the company produced 37,500 basketballs, sold 77,600 basketballs, and had an ending inventory of 50,850 basketballs. The basketballs sold for $19.00 each. Sunland uses the FIFO method.
Calculate Sunland’ manufacturing cost per unit under absorption costing. (Round per unit calculations and final answer to 2 decimal places, e.g. 15.25.)
2021 | 2022 | |||
---|---|---|---|---|
Manufacturing cost | $enter a dollar amount per unit rounded to 2 decimal places per unit | $enter a dollar amount per unit rounded to 2 decimal places per unit |
Prepare an absorption-costing income statement for 2022.
Sunland’ chief financial officer, Mr. Richard, is contemplating the benefits of using the absorption-costing and variable-costing approaches. He has asked you to perform a variety of tasks to help him analyze the differences between the two approaches:
1. Reconcile the differences between the income values of the two approaches.
Reconciliation of net income | ||
---|---|---|
Variable-costing net income | $enter a dollar amount | |
FMOH deferred in ending inventory | enter a dollar amount | |
FMOH released from beginning inventory | enter a dollar amount | |
Absorption-costing net income | $enter a total amount |
2. Mr. Richard has heard that some basic managerial tasks can be better performed when variable costing is used. Calculate the break-even point in units for the company in 2022 using the variable-costing data. (Round answer to 0 decimal places, e.g. 5,275.)
Break-even point | enter the break-even point in units rounded to 0 decimal places | units |
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