A manufacturing company that produces a single product has provided the following data

concerning its most recent month of operations:

Selling price .............................................. $135

Units in beginning inventory ..................... 0

Units produced .......................................... 6,400
Units sold .................................................. 6,200
Units in ending inventory .......................... 200

Variable costs per unit:

Direct materials ......................................... $49
Direct labor................................................ $38
Variable manufacturing overhead ............. $6
Variable selling and administrative ........... $11

Fixed costs:
Fixed manufacturing overhead .................. $108,800
Fixed selling and administrative ............... $74,400

The total contribution margin for the month under the variable costing approach is:
A) $155,000
B) $260,400
C) $192,200
D) $83,400

Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting
LO: 2 Level: Easy

Solution:

Sales revenue ($135 × 6,200) ................................ $837,000

Variable cost: .........................................................
Direct materials ($49 × 6,200)............................ $303,800
Direct labor ($38 × 6,200) .................................. 235,000
Variable manufacturing overhead ($6 × 6,200) . 37,200
Variable selling and administrative ($11 ×
6,200) .............................................................. 68,200 644,800
Contribution margin............................................... $192,200
43. A manufacturing company that produces a single product has provided the following data
concerning its most recent month of operations:

Selling price ............................................... $123

Units in beginning inventory ..................... 0

Units produced ........................................... 1,000
Units sold ................................................... 900
Units in ending inventory .......................... 100

Variable costs per unit:

Direct materials ....................................... $41
Direct labor ............................................. $26
Variable manufacturing overhead ........... $4
Variable selling and administrative ........ $6

Fixed costs:
Fixed manufacturing overhead ............... $17,000
Fixed selling and administrative ............. $11,700

What is the net operating income for the month under variable costing?
A) $12,700
B) $5,600
C) $1,700
D) $14,400

Ans: A AACSB: Analytic AICPA BB: Critical Thinking

AICPA FN: Reporting LO: 2 Level: Medium

Solution:

Sales ($123 × 900) ................................................. $110,700

Variable cost of goods sold ($71 × 900) ............... 63,900
Less variable selling and administrative ($6 × 900) 5,400
Contribution margin .............................................. 41,400
Fixed cost:
Fixed manufacturing overhead ........................... $17,000
Fixed selling and administrative ........................ 11,700 28,700
Net operating income ............................................ $ 12,700
44. Swifton Company produces a single product. Last year, the company had net operating
income of $40,000 using variable costing. Beginning and ending inventories were 22,000
and 27,000 units, respectively. If the fixed manufacturing overhead cost was $3.00 per
unit, what was the income using absorption costing?
A) $15,000
B) $25,000
C) $40,000
D) $55,000

Ans: D AACSB: Analytic AICPA BB: Critical Thinking

AICPA FN: Reporting LO: 3 Level: Medium

Solution:

Difference between absorption costing net income and variable costing net
income = Change in inventory in units × Unit fixed manufacturing overhead
= (27,000 − 22,000) × $3 = 5,000 × $3 = $15,000
Net income under absorption costing = $40,000 + $15,000 = $55,000

45. Blake Company produces a single product. Last year, Blake's net operating income under
absorption costing was $3,600 lower than under variable costing. The company sold
10,000 units during the year, and its variable costs were $9 per unit, of which $1 was
variable selling expense. If production cost was $11 per unit under absorption costing,
then how many units did the company produce during the year?
A) 8,200 units
B) 8,800 units
C) 11,200 units
D) 11,800 units

Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting
LO: 3 Level: Hard

Solution:

Direct material + Direct labor + Variable manufacturing overhead

= Variable unit product cost = $9 – $1 = $8
Unit fixed manufacturing overhead = $11 – $8 = $3
Difference in net income between