McCracken Aerial Inc produces and sells a unique type of TV

McCracken Aerial, Inc., produces and sells a unique type of TV antenna. The company has just opened a new plant to manufacture the antenna, and the following cost and revenue data have been provided for the first month of the plant\'s operation Beginning inventory Units produced Units sold Selling price per unit Selling and administrative expenses 0 53,000 46,000 68 Variable per unit Fixed (total) 5 $558,000 Manufacturing costs Direct materials cost per unit Direct labor cost per unit Variable manufacturing overhead cost per unit$ Fixed manufacturing overhead cost (total) $ 13.6 $ 6.8 2 $742,000 Because the new antenna is unique in design, management is anxious to see how profitable it will be and has asked that an income statement be prepared for the month Required 1. Assume that the company uses absorption costing a. Determine the unit product cost. (Do not round intermediate calculations and round your final answer to 1 decimal place.) Unit product cost b. Prepare an income statement for the month McCracken Aerial, Inc. Absorption Costing Income Statement

Solution

Answers

---Fixed manufacturing overhead becomes part of the product cost.

---Selling & administrative expenses are not included in product cost.

---Fixed manufacturing overhead DO NOT become part of product cost.

---Selling & administrative expenses are not included in product cost.

A

Fixed manufacturing Overhead cost

$            7,42,000.00

B

Units produced

53000

C=A/B

Fixed manufacturing overhead per unit

$                        14.00

D

Direct material cost per unit

$                        13.60

E

Direct labor cost per unit

$                           6.80

F

Variable manufacturing overhead cost per unit

$                           2.00

G = C+D+E+F

Total Unit Product Cost

$                        36.40

A

Sales [46000 x $68]

$          31,28,000.00

B

Cost of Goods Sold [46000 x $36.4]

$          16,74,400.00

C=A-B

Gross Profit

$          14,53,600.00

D

Selling & administrative expenses [46000 x $5 + 558000]

$            7,88,000.00

E=C-D

Net operating Income

$            6,65,600.00

A

Direct material cost per unit

$                        13.60

b

Direct labor cost per unit

$                           6.80

C

Variable manufacturing overhead cost per unit

$                           2.00

D=A+B+C

Total Unit Product Cost

$                        22.40

A

Sales [46000 x $68]

$      31,28,000.00

Variable expenses:

B

Variable manufacturing cost [46000 x $22.4]

$          10,30,400.00

C

Variable selling & administrative expense [46000 x $5]

$            2,30,000.00

$      12,60,400.00

D=A-B-C

Contribution margin

$      18,67,600.00

Fixed expenses:

E

Fixed manufacturing overhead

$            7,42,000.00

F

Fixed selling & administrative expense

$            5,58,000.00

$      13,00,000.00

G=D-E-F

Net operating Income

$        5,67,600.00

A	Fixed manufacturing Overhead cost	$            7,42,000.00
B	Units produced	53000
C=A/B	Fixed manufacturing overhead per unit	$                        14.00
D	Direct material cost per unit	$                        13.60
E	Direct labor cost per unit	$                           6.80
F	Variable manufacturing overhead cost per unit	$                           2.00
G = C+D+E+F	Total Unit Product Cost	$                        36.40
A	Sales [46000 x $68]	$          31,28,000.00
B	Cost of Goods Sold [46000 x $36.4]	$          16,74,400.00
C=A-B	Gross Profit	$          14,53,600.00
D	Selling & administrative expenses [46000 x $5 + 558000]	$            7,88,000.00
E=C-D	Net operating Income	$            6,65,600.00