Home Base, Inc. reports the following production cost information:Beginning inventory10,000 unitsUnits produced97,000 unitsUnits sold92,000 unitsDirect labor$17 per unitDirect materials$34 per unitVariable overhead$26 per unitFixed overhead$1,940,000 in totalOperating costs$2,000,000 in totalAssume that productions costs have remained the same since the previous period and all units are sold for $137.00 per unit.a. Compute production cost per unit under variable costing.b. Compute production cost per unit under absorption costing.c. Determine net income using variable costing.d. Determine net income using absorption costing.
What will be an ideal response?
a. $17 DL + $34 DM + $26 VOH = $77 per unit under variable costing
b. $77 + ($1,940,000/97,000) FOH = $97 per unit under absorption costing
c. NI = ($137 - $77)(92,000 units) - $1,940,000 - $2,000,000 = $1,580,000
d. NI = ($137 - $97)(92,000 units) - $2,000,000 = $1,680,000
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