On August 31, the end of the first year of operations, during which 18,000 units were...

 

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On August 31, the end of the first year of operations, during which 18,000 units were manufactured and 13,500 units were sold, Olympic Inc. prepared the following income statement based on the variable costing concept: Olympic Inc. Income Statement For Year Ended August 31, 20-- $297,000 Sales Variable cost of goods sold: Variable cost of goods manufactured Less ending inventory 216,000 Variable cost of goods sold Manufacturing margin $81,000 Variable selling and administrative expenses 40,500 Contribution margin $40,500 Fixed costs: $12,000 Fixed manufacturing costs Fixed selling and administrative expenses 10.800 22,800 $17,700 Income from operations ======== A. Determine the unit cost of goods manufactured, based on (1) the variable costing concept and (2) the absorption costing concept. B. From a product-costing perspective, what is the basic difference between absorption costing and variable costing? C. Olympic Inc. is operating at 70% capacity and is considering a proposal to increase current production by 20%. Which costing method, absorption or variable, should be used to evaluate the proposal and why? What are the advantages and disadvantages of each method? $288,000 72,000 On August 31, the end of the first year of operations, during which 18,000 units were manufactured and 13,500 units were sold, Olympic Inc. prepared the following income statement based on the variable costing concept: Olympic Inc. Income Statement For Year Ended August 31, 20-- $297,000 Sales Variable cost of goods sold: Variable cost of goods manufactured Less ending inventory 216,000 Variable cost of goods sold Manufacturing margin $81,000 Variable selling and administrative expenses 40,500 Contribution margin $40,500 Fixed costs: $12,000 Fixed manufacturing costs Fixed selling and administrative expenses 10.800 22,800 $17,700 Income from operations ======== A. Determine the unit cost of goods manufactured, based on (1) the variable costing concept and (2) the absorption costing concept. B. From a product-costing perspective, what is the basic difference between absorption costing and variable costing? C. Olympic Inc. is operating at 70% capacity and is considering a proposal to increase current production by 20%. Which costing method, absorption or variable, should be used to evaluate the proposal and why? What are the advantages and disadvantages of each method? $288,000 72,000

Answer rating: 100% (QA)

Solution a 1 Variable costs of goods manufactured number of units produced 288000 13500 2133 2 Varia... View the full answer