The following data relate to Jupiter Company, a new corporation, during a period when the firm produced and sold 100,000 units and 90,000 units, respectively:Direct materials used$400,000Direct labor200,000Variable manufacturing overhead120,000Fixed manufacturing overhead250,000Selling and administrative expenses: ?  Variable45,000  Fixed 300,000The company met its original planned production target of 100,000 units. There were no variances during the period, and the firm's selling price is $15 per unit.Required: A.What is the cost of Jupiter's end-of-period finished-goods inventory under the variable-costing method?B.Calculate the company's variable-costing income.C.Calculate the company's absorption-costing income.

What will be an ideal response?


A. Ending finished-goods inventory (units): 0 + 100,000 - 90,000 = 10,000
Inventoriable costs under variable costing:

Direct materials used$400,000
Direct labor200,000
Variable manufacturing overhead120,000
Total$720,000

Variable cost per unit produced: $720,000 ÷ 100,000 units = $7.20 per unit
Ending inventory: 10,000 units × $7.20 = $72,000

B.
Sales revenue (90,000 units × $15)$1,350,000
Less: Variable Costs (90,000 units × $7.20) + $45,000 693,000
Contribution margin$657,000
Less: Fixed costs ($250,000 + $300,000) 550,000
Income$107,000

C. Predetermined fixed overhead rate: $250,000 ÷ 100,000 units = $2.50
Absorption cost per unit: $7.20 + $2.50 = $9.70

Sales revenue (90,000 units × $15)$1,350,000
Less: Cost of Goods Sold (90,000 units × $9.70)873,000
Gross margin$477,000
Less: Operating costs ($300,000 + $45,000) 345,000
Income$132,000

Business

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