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 | $ | 156 | |
Variable manufacturing overhead | $ | 16 | |
Fixed manufacturing overhead costs (total) | $ | 570,230 | |
Selling and administrative costs: | |||
Variable | 10 | % of sales | |
Fixed (total) | $ | 336,750 | |
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 $500 each.
During the first month of operations, the following activity was recorded:
Units produced | 4,490 | ||
Units sold | 3,420 | ||
Required:
1. Compute the unit product cost under each of the following costing method.
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2. Prepare an income statement for the month using absorption costing. (Do not leave any empty spaces; input a 0 wherever it is required.)
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3. Prepare a contribution format income statement for the month using variable costing. (Do not leave any empty spaces; input a 0 wherever it is required.)
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4. Not available in Connect.
5. Reconcile the absorption costing and variable costing operating income figures in (2) and (3) above.
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