ASSIGNMENT 1-3: Integration Exercise Please complete Part 1 of Integration Exercise 6 on pp. 706-707 of the textbook. INTEGRATION EXERCISE 6 Normal Costing versus Actual Costing LO 2-1, LO 2-2, LO 2-3, LO 3-3, LO 3-4, LO 7-1, LO 7-2 Darwin Company manufactures only one product that it sells for S200 per unit The company uses plant wide ovcd1ead cost allocation based on the number of units produced. It provided the following e timates at the beginning of the year:

Number of units produced ............................. 50,000 Total fixed manufacturing overhead costs ................ $1,000,000 Variabte manufacturing overhead p@r unit produced ...... $12

During the year, the company had no beginning inventories of any kind and no ending raw materials or work in process inventories. All raw materials \\ere used in production as direct material. . An unexpected business downturn caused annual sales to drop to 38,000 unit . In response lo the decline in sales, Darwin decrea,;cd its annual production lo 40,000 units. The company's actual cost for the year were as follows:

Variable costs per unit: Manufacturing: Direct materials .. Direct labor............................... . Variable manufacturing overhead ........... Variable selling and administrative ........... . Fixed costs per year: Fixed manufacturing overhead.............. Fixed selllng and administrative expenses ......

$78 $60 $12 $15

$1,000,000 $350,000

Required: I. Assuming the company uses nonnal costing (as described in Chapters 2 and 3): u. Compute the plantwide predetermined overhead rate. b. Compute the unit product cost for each unit produced during the year. c. Prepare u schedule of cost of goods manufactured and a schedule of cost of goods sold. Assume that any undcrapplicd or overapp\icd overhead is closed entirely to cost of goods sold. d. Compute absorption costing net operating income for the year. 2. Assuming the company uses actual costing (us described in Chapter 7}: a. Compute the unit product cost for each unit produced during the ye:.ir. b. Compute absorption costing net operating income for the year. 3. Arc your normal costing and actual costing net opcmting incomes the same'! Why'! Support your answer with computations.