Bressler Company produced 50000 units and sold 40000 units a

Bressler Company produced 50,000 units and sold 40,000 units at a sales price of $33 per unit During 2014, Beginning inventory was ,000 units. The following costs were identified for 2014 VCSI9.50 per unit Variable manufacturing costs Total fixed manufacturing overhead costs Marketing expenses FMGH-S180,000 $3.00 per unit sold, plus $60.000 per year ompany uses normal costing. The total dollar amount of the budgeted fixed manufacturing overhead Bressler C costs was $180,000 in both the c production for each year was 45,000 units. urrent yea r and the prior year For 2013 and 2014, the budgeted level of Reauired: a. Using the information above, calculate operating income using ation above, compute and prepare a reconciliation (using the form on the answer sheet) of b. Using the informa the difference between the variable costing operating income and absorption costing operating i c. Bressler Company has sufficient capacity to produce as many as 72.000 units in a year: however production level of 60.000 units would be more realistic. The demand for the next three years is ex As indicated in the narrative above, the budgeted level of production for the y decides to use practical capacity to calculate the budgeted manufacturing ulate the budgeted manufacturing overhead rate and determine the dollar amount of the average current year was 45,000 u o units overhead rate (instead of using the master-budget capacity identifi practical capacity, recalculatet ed above for use in requirement b). Using production-volume variance and the dollar amount of the adjusted costof-goeds-sold-inder-absorption costing. Note: Be sure to indicate whether the p roduction volume-v ariance is favorable or unfavorable .)

Solution

b.) Reconciliation

a.) Operating Income Using Variable Costing
	Sales			(40000x33	)		1320000
	Less: Cost of Goods Sold
	Opening stock [5000x 19.5]			97500
	Add: Cost of Goods manufacutred [50000x19.5]	975000
	Cost of Goods available for Sales		1072500
	Less: Closing stock [(50000+5000-40000) X (19.5)]	292500	780000
	Gross Contribution margin				540000
	Less: Variable Marketing expenses (40000x3)		120000
	Contribution Margin					420000
	Less: Period Expenses
	Fixed Manufacturing overhead Cost		180000
	Fixed Marketing expenses			60000	240000
	Net Operating Income				180000