The following data relate to Santa Mia, Inc., a new company:Planned and actual production200,000 unitsSales at $48 per unit170,000 unitsManufacturing costs:? Variable$18 per unit Fixed$840,000Selling and administrative costs:? Variable$7 per unit Fixed$925,000There were no variances during the period.Required: A. Determine the number of units in the ending finished-goods inventory.B. Calculate the cost of the ending finished-goods inventory under (1) variable costing and (2) absorption costing.C. Determine the company's variable-costing income.D. Determine the company's absorption-costing income.
What will be an ideal response?
A. Ending finished-goods inventory: 0 + 200,000 - 170,000 = 30,000 units
B. Variable costing: 30,000 units × $18 = $540,000
Absorption costing:
Predetermined fixed overhead rate: $840,000 ÷ 200,000 units = $4.20;
30,000 units × ($18.00 + $4.20) = $666,000
| C. Sales revenues (170,000 units x $48) | $8,160,000 |
| Less: Variable costs [170,000 units x ($18 + $7)] | 4,250,000 |
| Contribution margin | $3,910,000 |
| Less: Fixed costs ($840,000 + $925,000) | 1,765,000 |
| Income | $2,145,000 |
| D. Sales revenues (170,000 units x $48) | $8,160,000 |
| Less: Cost of goods sold [170,000 units x ($18 + $4.20)] | 3,774,000 |
| Gross margin | $4,386,000 |
| Less: Operating costs [(170,000 units x $7) + $925,000] | 2,115,000 |
| Income | $2,271,000 |
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