Valu Corporation employs an absorption costing system for both internal and external reporting purposes. However, it...

 

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Valu Corporation employs an absorption costing system for both internal and external reporting purposes. However, it is considering the adoption of a variable costing system for internal reporting purposes. Information related to Valu's operations in 2020 is presented below. Budgeted Actual (in units) (in units) Beginning finished good inventory 35,000 35,000 Sales 140,000 125,000 Production 140,000 130,000 The budgeted costs per unit presented in the table below are based on the budgeted sales and production from above. The company uses a normal costing system and allocates any over- or underapplied overhead to the cost of goods sold for the year. Budgeted Costs Actual Costs Total Per Unit Direct materials $1,680,000 $12.00 Direct labor 1,260,000 9.00 Variable manufacturing overhead 560,000 4.00 Incurred $1,560,000 1,170,000 520,000 Fixed manufacturing 700,000 5.00 715,000 Variable selling costs 1,120,000 8.00 1,000,000 Fixed selling costs 980,000 7.00 980,000 Variable administrative costs 280,000 2.00 250,000 Fixed administrative costs 420,000 3.00 425,000 Additional Information: • For 2019, the actual number of units produced and the actual manufacturing costs incurred were the same as those that had been budgeted. Therefore, the actual per unit cost of the finished goods inventory at the end of 2019 (the beginning of 2020) was the same as the budgeted per unit cost for 2019. The budgeted per unit manufacturing costs for 2019 were the same as those expected for the past year (2020). There were no work-in-process inventories at the beginning or the end of 2020. The planned and actual selling price for 2020 was $70 per unit. (f) Using absorption costing, what was the amount of over- (O) or underapplied (U) overhead for 2020? Amount of over- or underapplied overhead for $ OU (g) What was Valu's total contribution margin for 2020? Total contribution margin for 2020 $ Valu Corporation employs an absorption costing system for both internal and external reporting purposes. However, it is considering the adoption of a variable costing system for internal reporting purposes. Information related to Valu's operations in 2020 is presented below. Budgeted Actual (in units) (in units) Beginning finished good inventory 35,000 35,000 Sales 140,000 125,000 Production 140,000 130,000 The budgeted costs per unit presented in the table below are based on the budgeted sales and production from above. The company uses a normal costing system and allocates any over- or underapplied overhead to the cost of goods sold for the year. Budgeted Costs Actual Costs Total Per Unit Direct materials $1,680,000 $12.00 Direct labor 1,260,000 9.00 Variable manufacturing overhead 560,000 4.00 Incurred $1,560,000 1,170,000 520,000 Fixed manufacturing 700,000 5.00 715,000 Variable selling costs 1,120,000 8.00 1,000,000 Fixed selling costs 980,000 7.00 980,000 Variable administrative costs 280,000 2.00 250,000 Fixed administrative costs 420,000 3.00 425,000 Additional Information: • For 2019, the actual number of units produced and the actual manufacturing costs incurred were the same as those that had been budgeted. Therefore, the actual per unit cost of the finished goods inventory at the end of 2019 (the beginning of 2020) was the same as the budgeted per unit cost for 2019. The budgeted per unit manufacturing costs for 2019 were the same as those expected for the past year (2020). There were no work-in-process inventories at the beginning or the end of 2020. The planned and actual selling price for 2020 was $70 per unit. (f) Using absorption costing, what was the amount of over- (O) or underapplied (U) overhead for 2020? Amount of over- or underapplied overhead for $ OU (g) What was Valu's total contribution margin for 2020? Total contribution margin for 2020 $

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Absorption Costing Finding the Applied Overhead Absorption costing includes fixed overhead in the product cost We know the budgeted total manufacturin... View the full answer