1.Dallas Inc. prepared a budget last period that called for sales of 15,000 units at a price of $20 each. The costs per unit were estimated to amount to $10 variable and $4 fixed.
During the period, actual production and saleswere 14,000 units. The actual selling price was $22 per unit. Variable costs were $9 per unit. Fixed costs actually incurred were $65,000.
Required:
a) Prepare operating statements for the actual output, as well as a static budget and a flexible budget.
b) Explain what is indicated when comparing the operating statements.
2. Guy's Grills, Inc. makes a single product-a handmade specialty barbeque grill that sells for $500. Data for last year's operations follow:
Units in beginning inventory 0
Units produced 40,000
Units sold 30,000
Variable costs per unit:
Direct materials $ 100
Direct labor 150
Variable manufacturing overhead 80
Variable selling and administrative 20
Total variable cost per unit $350
Fixed costs:
Fixed manufacturing overhead $1,000,000
Fixed selling and administrative 500,000
Total fixed costs $1,500,000
Required:
a) Compute the unit product cost for one barbeque grill for absorption costing, variable costing, and throughput costing.
b) Prepare an income statement for the year using the absorption costing approach.
c) Prepare an income statement for the year using the variable costing approach.
d) Explain the difference in operating income for the absorption and variable costing approaches.