University:
Grand Rapids Community College
Course:
Financial and Managerial Accounting: Information for Decisions - John J. Wild
Academic year:

2024
Views:

201

Pages:

2
Author:

stud_ice13

To solve the exercises, we need to focus on key costing methods like absorption costing, variable costing, and special order decisions. Here's a breakdown of how to approach the solutions. Exercise 19-1: Absorption Costing Calculations a. Compute Product Cost per Unit using Absorption Costing Absorption costing includes direct materials, direct labor, variable manufacturing overhead, and fixed manufacturing overhead in the product cost per unit. Formula for Unit Cost: Product Cost per Unit=Direct Materials+Direct Labor+Variable Overhead+Total F ixed Overhead Units Produced b. Cost of Ending Finished Goods Inventory Ending Inventory=Ending Units×Product Cost per Unit c. Cost of Goods Sold using Absorption Costing COGS=Units Sold×Product Cost per Unit Exercise 19-2: Variable Costing Calculations a. Compute Product Cost per Unit using Variable Costing Variable costing only includes direct materials, direct labor, and variable manufacturing overhead in the product cost per unit. Formula for Unit Cost: Variable Product Cost per Unit=Direct Materials+Direct Labor+Variable Overhead b. Cost of Ending Finished Goods Inventory Ending Inventory (Variable)=Ending Units×Variable Product Cost per Unit c. Cost of Goods Sold using Variable Costing COGS (Variable)=Units Sold×Variable Product Cost per Unit Exercise 19-3: Income Statement under Absorption and Variable Costing 1. Absorption Costing Income Statement: • Include sales, COGS (computed above using absorption costing), gross profit, and operating expenses (variable + fixed selling & administrative costs). 2. Variable Costing Income Statement: • Include sales, variable COGS (computed above), contribution margin, and fixed costs (manufacturing and selling/admin). Additional Guidelines for Exercises 19-4 to 19-21 • • • Absorption costing vs. variable costing involves fixed overhead treatment. Under absorption, fixed overhead is assigned per unit and treated as part of product cost. Contribution margin is sales minus variable costs. For special order decisions, compute the contribution margin of the special order and evaluate if it covers variable costs and contributes to fixed costs/profit. Would you like step-by-step numerical solutions for these exercises using specific figures, or guidance on how to set up your calculations with hypothetical data?