Chapter 6 Variable Costing and Segment Reporting Obj. Renconcile the Differences between Variable Costing and Absorption Costing 1 Prepare Year 1 Contribution Format I/S for Harvey Company, Actual Number of units produced annually Variable costs per unit 25,000 Direct materials, direct labor, $ B Variable mig, overhead $ 2 Selling & administrative expenses . Fixed costs per year Selling & administrative expenses $150,000 $100,000 Manufacturing overhead when 25,000 units are produced Q1: Year 1 Contribution format US (Variable costing when 25,000 units are produced 02: Year 1 Traditional format I/S (Absorption costing) QYear 2 Contribution format /S and Traditional format US when 25,000 units are produced Q: Year 1 Contribution format US and Traditional format U/S when 40,000 units are produced Q9Year 2 Contribution format 1/5 and Traditional format 1/5 when 40,000 units are produced Selling price is $30/pair. units produced and sold units produced but not sold totao units produced 20,000 units 5,000 units 25,000 units 3/ ntroduction Introduction Practice Practice Review Contribution Format U/S Per Unit Total Year 1 2 Prepare Year 1 Traditional Format I/S for Harvey Company, selling price is $30/pair, units sold At the beginning of the year Estimated Fixed OH $ 150,000 Estimated units produced $ 25,000 (Use "units produced" as the cost driver) POHR= Traditional Format 1/5 Per Unit Estimated variable OH per unit Direct labor and direct material per unit per unit Total Year 1 (Product cost: DM, DL and var. Mfg. OH) (Period cost: Var S&A, Fixed Mfg. OH and Fixed S&A) 20,000 units 2 per unit 8 per unit (Product cost: DM, DL and Mfg. OH): (Period cost: selling, general and administrative)