units inc medS00m var ble r nufacturing costs and 15 units o

units inc medS00m var ble r ?nufacturing costs and $15 units o s 50 ea n A e year using absorption cos rig ?nd vanable cosing In xed manufacturing costs Haddan also 1ncurre S7 000 in Selling and Administrative Costs all xed. Calculate the lotal product cost per unit Calculate the operating incorne for the year using absorption costing. Absorption operating income for th 2. Haddan Company has 150 units in ? n shed Coods Inventory a the beginning o the accounting penod. Du ng the BCCounting pe od Hadde n pro uced 250 units and Sold 40 Operalina Incoe Calculate the operating income tor the year using vanable casting Variable costing cosing Operating Choose from any list or enter any number in the input fields and then continue to the next question.

Solution

Product cost under absorption Costing = 60 + 15 = $75

Product cost under Variable cosing = 60

Operating income under absorption Costing can be calculated as follows:

Sales = 100x250 = 25000

Less: Cost of goods sold

Opening stock = 150x75 = 11250

Add: Production = 250x75 = 18750

Less: Closing stock = 300x75 = (22500)

Cost of goods sold = 7500

Gross profit = 25000 - 7500 = $17500

Less: Selling and administration costs = $7000

Operating Income = 17500 - 7000 = $10,500

Operating income under Variable Costing can be calculated as follows:

Sales = 100x250 = 25000

Less: Cost of goods sold

Opening stock = 150x60 = 9000

Add: Production = 250x60 = 15000

Less: Closing stock = 300x60 = (18000)

Cost of goods sold = 6000

Gross profit = 25000 - 6000 = $19000

Less: Fixed manufacturing cost = 250 x15 = 3750

Less: Selling and administration costs = $7000

Operating Income = 19000 - 3750 - 7000 = $8,250