Selling Price $112
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Problem 2 Lehne Company, which has only one product, has provided the following data concerning its most recent month of operations: Selling Price $112 Units in beginning inventory 500 Units produced 2,600 Units sold 3,000 Units in ending inventory 100 Variable Costs Per Unit: Direct Materials $13 Direct Labor $49 Variable Manufacturing OH $6 Variable Selling and Admin $10 Fixed Costs: Fixed Manufacturing OH $80,600 Fixed Selling and Admin $15,000 The company produces the same number of units every month, although the sales in units vary from month to month. The company's variable costs per unit and total fixed costs have been constant from month to month. Questions: 1. What is the unit product cost for the month under variable costing? (3 points) 2. What is the unit product cost for the month under absorption costing? (3 points) 3. What is the Net Operating Income using the variable costing method? (3 points) 4. What is the Net Operating Income using the absorption costing method? (3 points) 5. Disregarding the results above, explain the differences between the absorption and the variable costing income statements in general terms. (3 points) 5) Under Absorption Costing, all manufacturing costs are charged to – absorbed by- the product. Under this approach, a job is assigned the costs of direct materials, direct labor, and both variable and fixed manufacturing overhead. Under Variable Costing, only direct materials, direct labor, and variable manufacturing costs are recognized as period costs. Fixed Manufacturing Overhead costs are recognized as Period Costs (expenses0 when incurred. The difference in Operating Income between the two costing methods is calculated (or verified by Multiplying the difference between units sold, & units produced by the Unit FOH. In our problem here, this can be verified as: (3,000 – 2,600)*($80,600 / 2,600) = $12,400 Download 25.5 Kb. Share with your friends:
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