In 2019, TGIT Inc. the company incurred the following costs: Direct materials $ 5.00 per unit Direct
Question:
Direct materials | $ 5.00 per unit |
Direct labour | $ 4.00 per unit |
Variable manufacturing overhead | $ 3.00 per unit |
Fixed manufacturing overhead | $ 30,000 |
Variable selling expenses | $ 1.50 per unit |
Fixed selling expenses | $ 10,000 |
Costs are unchanged from 2018. Use the costs provided to answer the following questions for each of the following scenarios:
SCENARIO 1: In 2019, TGIT produced 40,000 units and sold 36,000 units. There were 2,000 units in beginning FG inventory and no beginning or ending WIP inventory.
a) For scenario 1, calculate TGIT's product cost per unit in 2019 under a variable costing approach.
b) For scenario 1, calculate TGIT's total selling expenses in 2019 under a variable costing approach.
c) For scenario 1, calculate TGIT's product cost per unit in 2019 under an absorption costing approach.
d) For scenario 1, calculate TGIT's total selling expenses in 2019 under an absorption costing approach.
e) For scenario 1, will TGIT's 2019 net income under absorption costing be higher or lower than under variable
SCENARIO 2: In 2019, TGIT produced 40,000 units and sold 38,000 units. There was no beginning FG inventory and no beginning or ending WIP inventory.
f) For scenario 2, calculate TGIT's product cost per unit in 2019 under an absorption costing approach.
g) Under scenario 2, would both of your answers to the part e) questions be the same as under scenario 1?
SCENARIO 3: In 2019, TGIT produced 40,000 units and sold 36,000 units. There were 2,000 units in beginning FG inventory. There was no beginning or ending WIP inventory. The company produced 40,000 units in 2010 as well.
h) For scenario 3, calculate TGIT's product cost per unit in 2019 under an absorption costing approach.
i) Under scenario 3, would both of your answers to the part e) questions be the same as under scenario 1?
Cornerstones of Financial and Managerial Accounting
ISBN: 978-1111879044
2nd edition
Authors: Rich, Jeff Jones, Dan Heitger, Maryanne Mowen, Don Hansen