A manufacturer reports direct materials of $5 per unit, direct labor of $2 per unit, and variable overhead of $3 per unit. Fixed overhead is $152,000 per year, and the company estimates sales of 15,200 units at a sales price of $23 per unit for the year. The company has no beginning finished goods inventory. 1. If the company uses absorption costing, compute gross profit assuming (a) 15,200 units are produced and 15,200 units are sold and (b) 19,000 units are produced and 15,200 units are sold. 2. If the company uses variable costing, how much would contribution margin differ if the company produced 19,000 units instead of producing 15,200? Assume the company sells 15,200 units. Hint: Calculations are not required. Complete this question by entering your answers in the tabs below. Required 1 Required 2 If the company uses absorption costing, compute gross profit assuming (a) 15,200 units are produced and 15,200 units are sold and (b) 19,000 units are produced and 15,200 units are sold. Gross profit (a) 15,200 Units Produced and 15,200 Units Sold (b) 19,000 Units Produced and 15,200 Units Sold < Required 1 Required 2 >

A manufacturer reports direct materials of $5 per unit, direct labor of $2 per unit, and variable overhead of $3 per unit. Fixed overhead is $152,000 per year, and the company estimates sales of 15,200 units at a sales price of $23 per unit for the year. The company has no beginning finished goods inventory. 1. If the company uses absorption costing, compute gross profit assuming (a) 15,200 units are produced and 15,200 units are sold and (b) 19,000 units are produced and 15,200 units are sold. 2. If the company uses variable costing, how much would contribution margin differ if the company produced 19,000 units instead of producing 15,200? Assume the company sells 15,200 units. Hint: Calculations are not required. Complete this question by entering your answers in the tabs below. Required 1 Required 2 If the company uses absorption costing, compute gross profit assuming (a) 15,200 units are produced and 15,200 units are sold and (b) 19,000 units are produced and 15,200 units are sold. Gross profit (a) 15,200 Units Produced and 15,200 Units Sold (b) 19,000 Units Produced and 15,200 Units Sold < Required 1 Required 2 >

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Inventory Accounting

Inventory accounting is that branch of accounting that helps in determining the specific value of assets at different stages of production and development.

Question

A manufacturer reports direct materials of $5 per unit, direct labor of $2 per unit, and variable overhead of $3 per unit. Fixed overhead
is $152,000 per year, and the company estimates sales of 15,200 units at a sales price of $23 per unit for the year. The company has
no beginning finished goods inventory.
1. If the company uses absorption costing, compute gross profit assuming (a) 15,200 units are produced and 15,200 units are sold and
(b) 19,000 units are produced and 15,200 units are sold.
2. If the company uses variable costing, how much would contribution margin differ if the company produced 19,000 units instead of
producing 15,200? Assume the company sells 15,200 units. Hint: Calculations are not required.
Complete this question by entering your answers in the tabs below.
Required 1 Required 2
If the company uses absorption costing, compute gross profit assuming (a) 15,200 units are produced and 15,200 units are
sold and (b) 19,000 units are produced and 15,200 units are sold.
Gross profit
(a) 15,200 Units (b) 19,000 Units
Produced and
Produced and
15,200 Units Sold
15,200 Units Sold
< Required 1
Required 2 >

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