Question
Zurgot Inc. has just organized a new division to manufacture and sell specially designed computer tables, using select hardwoods. The divisions monthly costs are shown
Zurgot Inc. has just organized a new division to manufacture and sell specially designed computer tables, using select hardwoods. The divisions monthly costs are shown in the schedule below:
Manufacturing costs: | |||
Variable costs per unit: | |||
Direct materials | $ | 190 | |
Variable manufacturing overhead | $ | 20 | |
Fixed manufacturing overhead costs (total) | $ | 672,640 | |
Selling and administrative costs: | |||
Variable | 15 | % of sales | |
Fixed (total) | $ | 362,595 | |
Zurgot regards all of its workers as full-time employees, and the company has a long-standing no-layoff policy. Furthermore, production is highly automated. Accordingly, the company includes its labour costs in its fixed manufacturing overhead. The tables sell for $554 each.
During the first month of operations, the following activity was recorded:
Units produced | 5,255 | ||
Units sold | 4,080 | ||
Required:
1. Compute the unit product cost under each of the following costing method.
2. Prepare an income statement for the month using absorption costing. (Do not leave any empty spaces; input a 0 wherever it is required.
3. Prepare a monthly contribution format income statement using variable costing. (Do not leave any empty spaces; input a 0 wherever it is required.)
4. Reconcile the absorption costing and variable costing operating income figures in (2) and (3) above.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started