Information taken from Horner Corporation's May accounting records follows.Direct materials used$150,000Direct labor80,000Variable manufacturing overhead30,000Fixed manufacturing overhead100,000Variable selling and administrative costs51,000Fixed selling and administrative costs60,000Sales revenues625,000Required: A. Assuming the use of variable costing, compute the inventoriable costs for the month.B. Compute the month's inventoriable costs by using absorption costing.C. Assume that anticipated and actual production totaled 20,000 units, and that 18,000 units were sold during May. Determine the amount of fixed manufacturing overhead and fixed selling and administrative costs that would be expensed for the month under (1) variable costing and (2) absorption costing.D. Assume the same
data as in requirement "C." Compute the contribution margin that would be reported on a variable-costing income statement.
What will be an ideal response?
A.
| Direct materials used | $150,000 |
| Direct labor | 80,000 |
| Variable manufacturing overhead | 30,000 |
| Total | $260,000 |
B.
| Direct materials used | $150,000 |
| Direct labor | 80,000 |
| Variable manufacturing overhead | 30,000 |
| Fixed manufacturing overhead | 100,000 |
| Total | $360,000 |
C.
1. Fixed manufacturing overhead: $100,000
Fixed selling and administrative costs: $60,000
2. Fixed manufacturing overhead: ($100,000 ÷ 20,000 units) × 18,000 units = $90,000
Fixed selling and administrative costs: $60,000
D.
Variable manufacturing costs: $150,000 + $80,000 + $30,000 = $260,000
Variable manufacturing costs per unit: $260,000 ÷ 20,000 units = $13
Contribution margin: $625,000 - [(18,000 × $13) + $51,000] = $340,000
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