Absortion and Variable Costing, Production Constant, Sales

PROBLEM 5-14 Absortion and Variable Costing, Production Constant, Sales (LO1, LO2, LO3, LO4)

Tami’s Creations, Inc. Income Statement For the Quarter Ended March 31 Sales (28,000 units)……………………………………                                             $1,120,000 Variable Expense : Variable cost of goods sold……………………                    $462,000 Variable selling and administrative……………                        168,000             630,000 Contribution margin…………………………………..                                                   490,000 Fixed expense :             Fixed manufacturing overhead………………..                       300,000             Fixed selling and administrative……………....                       200,000             500,000 Net operating loss……………………………………..                                             $  (10,000)

Tami Tyler operied Tami’s Creations, Inc.. a small manufacturing company, at the beginning of the year. Getting the company through it’s first quarter of operation

Ms. Tyler is discouraged over the loss shown for the quarter, particularly because she had planned to use the statement as support for a bank loan. Another friend, a CPA, insists that the company should be using absorption costing rather than variable costing and argues that if absorption costing has been used the company would probably have reported at leas some profit for the quarter.

            At this point, Ms Tyler is manufacturing only one product, a swimsuit. Production and cost data relating to the ……… for the first quarter follow.

	Units produced…………………………………………………………       30,000 Units sold…………………………………………………………………         28,000 Variable costs per unit:                 Direct materials…………………………………………..          $3,50                 Direct labor…………………………………………………         $12,00                 Variable manufacturing overhead………………          $1,00                 Variable selling and administrative…………….           $6,00

 

Required:

1.      Complete the following:

a.       Compute the unit product cost under absorption costing.

b.      Redo the company’s income statement for the quarter using absorption costing.

c.       Reconcile the variable and absorption costing net operating income (loss) figures.

2.      Was the CPA correct in suggesting that the company really earned a ”profit” for the quarter? Explain.

3.      During the second quarter of operating, the company again produced 30,000 units but sold 32,000 units, (Assume no change in total fixed costs)

a.       Prepare a contribution format income statement for the quarter using variable costing.

b.      Prepare an income statement for the quarter using absorption costing.

c.       Reconcile the variable and absorption costing net operating incomes.

Direct Material                                                                                                                                  $ 3.50 Direct Labor                                                                                                                                        $ 12.00 Variable Manufacturing Overhead                                                                                           $ 1.00 Fixed Manufacturing Overhead ($30,000 / $30,000)                                                          $ 10.00 Absorption costing unit product cost                                                                                       $ 26.50

1). a.  Harga produksi per unit dengan metode absorption costing

b.      Laporan laba rugi dengan absorption costing

Tami’s Creations, Inc. Income Statement For the Quarter Ended March 31 Sales (28,000 x $40)                                                                                                                         $ 1,120,000 Cost of goods sold (28,000 x $26.50)                                                                                        $ 742,000     Gross margin                                                                                                                                     $                  378,,000 Selling and administrative expenses                 Variable selling and administrative                           $ 168,000                 Fixed selling and administrative                                 $ 200,000                             $                  368,000 Net Income Operation                                                                                                                  $                   10,000

 

c.       Rekonsiliasi

Variable costing loss operating income                                                                                   $              (10,000) Add: Fixed Manufacturing Overhead deferred in inventory under absorption costing ( 2,000 unit x $ 10.00)                     $                20,000 Absorption costing net operation income                                                                             $                10,000

 

2). Dengan metode absorption costing perusahaan tersebut mendapatkan keuntungan sebesar     $10,000 diperoleh dari adanya loss operating income sebesar $ 10,000yang ditambahkan dengan Fixed Manufacturing Overhead sebesar $ 20,000 sehingga dengan menggunakan metode Absorption Costing terjadi Gain sebesar $ 10,000.

3).  a. laporan laba rugi variable costing

Tami’s Creations, Inc. Income Statement For the Quarter Ended April 31 Sales ( 32,000 units x $40)                                                                                                             $ 1,280,000 Variable Expenses:                 Variable cost of goods sold                                          $ 528,000                 Variable selling and administrative                           $ 192,000                             $     720,000 Contribution Margin                                                                                                                       $     560,000 Fixed Expenses:                 Fixed Manufacturing Overhead                                 $ 300,000                 Fixed Selling and Administrative                                                $ 200,000                             $     500,000 Net Operating Income                                                                                                                   $       60,000

 

b.       Laporan laba rugi absorption costing

Tami’s Creations, Inc. Income Statement For the Quarter Ended April 31 Sales ( 32,000 unit x $40)                                                                                                               $              1,280,000 Cost of Goods Sold ( 32,000 units x $ 26.50)                                                                          $                 848,000 Gross Margin                                                                                                                                     $                 432,000 Selling and Administrative Expenses:                 Variable Selling and Administrative                          $ 192,000                 Fixed Selling and Administrative                                                $ 200,000                             $                392,000 Net Income Operations                                                                                                                                $                   40,000

 

c.       Rekonsiliasi

Variable Costing Net Operating Income                                                                                                 $    60,000 Deduct: Fixed Manufacturing Overhead costs released from inventory under absorption costing ( 2,000 units x $ 10)                        $  (20,000) Absorption Costing Net Operating Income                                                                                           $    40,000

 

ex.

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