Coverall Inc. produces and sells a unique type of case for a standard size tablet computer that
Question:
Coverall Inc. produces and sells a unique type of case for a standard size tablet computer that is guaranteed waterproof but still allows for regular functionality of the tablet. The company has just opened a new plant to manufacture these cases, and the following cost and revenue data have been provided for the first month of the plant’s operation in the form of a worksheet:
Beginning inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0
Units produced . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000
Units sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000
Selling price per unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $75
Selling and administrative expenses:
Variable per unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $8
Fixed (total) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $525,000
Manufacturing costs:
Direct materials cost per unit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $18
Direct labour cost per unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $8
Variable manufacturing overhead cost per unit . . . . . . . . . . . . . . . . . . . . .. . . . . . $6
Fixed manufacturing overhead cost (total) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . $630,000
Since the new case 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.
b . Prepare an income statement for the month.
2. Assume that the company uses variable costing.
a. Determine the unit product cost.
b . Prepare a contribution format income statement for the month.
3. Explain the reason for any difference in the ending inventory balances under the two costing methods and the impact of this difference on reported operating income.
Ending InventoryThe ending inventory is the amount of inventory that a business is required to present on its balance sheet. It can be calculated using the ending inventory formula Ending Inventory Formula =...
Step by Step Answer:
Managerial Accounting
ISBN: 978-1259024900
9th canadian edition
Authors: Ray Garrison, Theresa Libby, Alan Webb