Problem
Bruster Company sells its products for $70 each. The current production level is 15,000 units and only 14,000 units were sold this month.
Unit manufacturing costs are:
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Unit manufacturing costs are:
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Direct materials
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$11.00
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Direct manufacturing labor
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$13.00
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Variable manufacturing overhead costs
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$10.00
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Total fixed manufacturing overhead costs
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$60.000 per month
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Marketing expenses
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$2.00 per unit. plus $26,000 per month
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Required:
A. Assuming the use of variable costing, compute the unit inventoriable cost for the month. Hint: What is the product cost under variable costing?
B. Determine the fixed manufacturing overhead rate under absorption costing. Hint: I am asking for the predetermined overhead rate per unit.
C. Compute the unit inventoriable cost by using absorption costing. Hint: What is the product cost under absorption costing?
D. What is the ending finished goods balance using variable costing? Hint: I am asking for the ending finished goods balance in dollar terms.
E. What is the ending finished goods balance using Absorption costing? Hint: I am asking for the ending finished goods balance in dollar terms.
F. What will be the difference in the dollar amount of income between variable costing and absorption costing? Which one will have the highest income? Why? Hint: You do not need to prepare income statements, since you can reconcile the difference in the change in inventory times the FOH rate.