Exercise 8-24 Inventory Valuation under Absorption and Variable Costing

Overton Company produced 80,000 units last year. The company sold 79,000 units and there was no beginning inventory. The company chose practical activityat 80,000 unitsto compute its predetermined overhead rate. Manufacturing costs are as follows:

Direct materials	$596,000
Direct labor	104,000
Variable overhead	88,000
Fixed overhead	228,800

Required:

1.Calculate the cost of one unit of product under absorption costing.

2.Calculate the cost of one unit of product under variable costing.

3.Calculate the cost of ending inventory under absorption costing.

4.Calculate the cost of ending inventory under variable costing.

OBJECTIVE 1

Exercise 8-25 Income Statements under Absorption and Variable Costing

In the coming year, Kalling Company expects to sell 28,700 units at $32 each. Kallings controller provided the following information for the coming year.

Units production	30,000
Unit direct materials	$9.95
Unit direct labor	$2.75
Unit variable overhead	$1.65
Unit fixed overhead*	$2.50
Unit selling expense (variable)	$2.00
Total fixed selling expense	$65,500
Total fixed administrative expense	$231,000

*

The unit fixed overhead is based on 30,000 units produced.

Required:

1.Calculate the cost of one unit of product under absorption costing.

2.Calculate the cost of one unit of product under variable costing.

3.Calculate operating income under absorption costing for next year.

4.Calculate operating income under variable costing for next year.

OBJECTIVE 1

Exercise 8-30 Segmented Income Statements, Inventory Valuation

For the coming year, Paulson Computers Inc. expects to produce 144,000 computers. Of these, 64,000 will be consumer (personal) computers and 80,000 will be small business computers. Common fixed overhead is $1,700,000. Additional information for the coming year is as follows:

	Consumer Computers	Small Business Computers
Price	$ 640	$ 1,675
Unit direct materials	490	1,180
Unit direct labor	90	310
Unit variable overhead	23	50
Unit variable selling expense	35	65
Total direct fixed overhead	120,000	350,000

Fixed selling and administrative expense for Paulson Computers is $2,960,000 per year.

Required:

1.CONCEPTUAL CONNECTION Calculate the unit variable cost under variable costing. Is this cost the same as unit variable product cost? Why or why not?

2.Prepare a segmented variable-costing income statement for next year. The segments correspond to product lines: consumer computers and small business computers.