Question

Cost of Goods Manufactured, using Variable Costing and Absorption Costing On March 31, the end of the first year of operations, Barnard Inc., manufactured 5,800 units and sold 5,000 units. The following income statement was prepared, based on the variable costing concept: Barnard Inc. Variable Costing Income Statement For the Year Ended March 31, 20Y1 Sales $1,900,000 Variable cost of goods sold: Variable cost of goods manufactured $1,055,600 Inventory, March 31 (145,600) Total variable cost of goods sold (910,000) Manufacturing margin $990,000 Total variable selling and administrative expenses (230,000) Contribution margin $760,000 Fixed costs: Fixed manufacturing costs $487,200 Fixed selling and administrative expenses 150,000 Total fixed costs (637,200) Operating income $122,800 Determine the unit cost of goods manufactured, based on (a) the variable costing concept and (b) the absorption costing concept.

Answer 1

Answer:

Unit Variable cost of goods manufactured = $ 182

Unit Cost of Goods Manufactured = $ 266

Explanation:

Variable Costing requires that the manufacturing variable costs treated as product costs and manufacturing fixed costs to be treated as period costs. Where as in absorption costing all manufacturing fixed and variable costs are treated as product costs .

Variable Costing

Variable cost of goods manufactured $1,055,600

No of units = 5,800

Unit Variable cost of goods manufactured= $1,055,600/ 5800 = $ 182

Fixed Mfg costs are added in the absorption costing.

Absorption Costing

Cost of Goods Manufactured= Variable cost of goods manufactured +Fixed manufacturing costs =$1,055,600+ $487,200 = $ 1542800

No of units = 5,800

Unit Cost of Goods Manufactured=$ 1542800/5800= $ 266

Given

Barnard Inc.

Variable Costing Income Statement

For the Year Ended March 31, 20Y1

Sales $1,900,000

Variable cost of goods sold:

Variable cost of goods manufactured $1,055,600

Inventory, March 31 (145,600)

Total variable cost of goods sold (910,000)

Manufacturing margin $990,000

Total variable selling and administrative expenses (230,000)

Contribution margin $760,000

Fixed costs:

Fixed manufacturing costs $487,200

Fixed selling and administrative expenses 150,000

Total fixed costs (637,200)

Operating income $122,800