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 labor | 200,000 |
| Variable manufacturing overhead | 120,000 |
| 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 |
You might also like to view...
Which of following is NOT an example of a marketing mindset?
a. We are dependent on our target audiences b. We want the transaction at any cost c. Customers do not necessarily control our mission definition d. We focus substantially on research e. Marketing is used to maximize our revenues
Producers are generally required to warn customers of obvious dangers associated with a product
Indicate whether the statement is true or false
A critical path activity?
a. Has zero slack time b. Contributes directly to the duration of the project c. Has zero slack time and contributes directly to the duration of the project d. Neither has zero slack time nor contributes directly to the duration of the project
The principal debtor's lack of capacity due to his status as a minor may be used by the surety to avoid payment of the obligation
a. True b. False Indicate whether the statement is true or false