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Horizon company has $25 per unit selling price, $8
Horizon company has $25 per unit selling price, $8.00 per unit in variable production cost and $1.00 per unit in variable selling and administrative cost. The annual fixed production cost is $400,000. The annual fixed selling and administrative cost is $50,000.
all solution in chegg wrong
Required:
- Complete the table below for each year. Assume a FIFO flow.
|
2017 |
2018 |
2019 |
2020 |
|
|
Units Produced |
120,000 |
150,000 |
100,000 |
100,000 |
|
Units Sold |
110,000 |
120,000 |
140,000 |
100,000 |
|
Manufacturing cost per unit under full absorption costing |
||||
|
Operating income under variable costing |
||||
|
Operating income under full absorption costing |
||||
|
Ending inventory using variable costing ($) |
||||
|
Ending inventory using full absorption costing ($) |
Expert Solution
Solution :-
a)
Stock calculations
| year | Opening stock | Units produced | Units sold | Closing stock |
| 2017 | 0 | 120,000 | 110,000 | 10,000 |
| 2018 | 10,000 | 150,000 | 120,000 | 40,000 |
| 2019 | 40,000 | 100,000 | 140,000 | 0 |
| 2020 | 0 | 100,000 | 100,000 | 0 |
Calculation of Manufacturing cost per unit (Full Costing)
| Year | 2017 | 2018 | 2019 | 2020 |
| Variable Production cost | 960,000 | 1,200,000 | 800,000 | 800,000 |
| Fixed production cost | 400,000 | 400,000 | 400,000 | 400,000 |
| Total production cost | 1,360,000 | 1,600,000 | 1,200,000 | 1,200,000 |
| Units produced | 120,000 | 150,000 | 100,000 | 100,000 |
| Production Cost per unit | 11.33 | 10.67 | 12.00 | 12.00 |
Calculation of Operating income (variable costing)
| 2017 | 2018 | 2019 | 2020 | |
| Sales | 2,750,000 | 3,000,000 | 3,500,000 | 2,500,000 |
| Less: | ||||
| Variable production cost | 880,000 | 960,000 | 1,120,000 | 800,000 |
| Variable selling & admn overheads | 110,000 | 120,000 | 140,000 | 100,000 |
| Contribution | 1,760,000 | 1,920,000 | 2,240,000 | 1,600,000 |
| Less: | ||||
| Fixed production costs | 400,000 | 400,000 | 400,000 | 400,000 |
| Fixed selling & admn costs | 50,000 | 50,000 | 50,000 | 50,000 |
| Operating income | 1,310,000 | 1,470,000 | 1,790,000 | 1,150,000 |
Calculation of Operating income (full costing)
| 2017 | 2018 | 2019 | 2020 | |
| Sales | 2,750,000 | 3,000,000 | 3,500,000 | 2,500,000 |
| Less: | ||||
| Total Production cost | 1,246,667 | 1,280,000 | 1,680,000 | 1,200,000 |
| Gross Income | 1,503,333 | 1,720,000 | 1,820,000 | 1,300.000 |
| Less: | ||||
| Variable selling & admn overheads | 110,000 | 120,000 | 140,000 | 100,000 |
| Fixed selling & admn costs | 50,000 | 50,000 | 50,000 | 50,000 |
| Operating profit | 1,343,333 | 1,550,000 | 1,630,000 | 1,150,000 |
Calculating Ending inventory
| 2017 | 2018 | 2019 | 2020 | |
|
Variable Costing (Variable production cost per unit x closing stock) |
80,000 | 320,000 | 0 | 0 |
|
Full costing (Total production cost per unit x closing stock) |
113,333.33 | 426,666.67 | 0 | 0 |
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