Absorption and Variable Costing with Over- and Underapplied Overhead Flaherty, Inc., has just completed its first year of operations. The unit costs on a normal costing basis are as follows: Manufacturing costs (per unit): Direct materials (3 lbs. @ 1.45) $4.35 Direct labor (0,4 hr. @ 14.50) 5.80 Variable overhead (0.4 hr. @ 5.00) 2.00 Fixed overhead (0.4 hr. @ 7.00) 2.80 Total $14 95 Selling and administrative costs: Variable $1.70 per unit Fixed $218.500 During the year, the company had the following activity: Units produced 26,000 Units sold 23,400 Unit selling price 535 Direct labor hours worked 10.400 Actual fixed overhead was $12,400 less than budgeted fixed overhead. Budgeted variable overhead was $5,900 less than the actual variable overhead. The company used an expected actual activity level of 10,400 direct labor hours to compute the predetermined overhead rates. Any overhead variances are closed to Cost of Goods Sold. 3. Prepare a variable-costing income statement. Round your answers to the nearest cent. 4. Reconcile the difference between the two income statements.

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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Absorption and Variable Costing with Over- and Underapplied Overhead Flaherty, Inc., has just completed its first year of operations. The unit costs on a normal costing basis are as follows: Manufacturing costs (per unit): Direct materials (3 lbs. @ 1.45) $4.35 Direct labor (0,4 hr. @ 14.50) 5.80 Variable overhead (0.4 hr. @ 5.00) 2.00 Fixed overhead (0.4 hr. @ 7.00) 2.80 Total $14 95 Selling and administrative costs: Variable $1.70 per unit Fixed $218.500 During the year, the company had the following activity: Units produced 26,000 Units sold 23,400 Unit selling price 535 Direct labor hours worked 10.400 Actual fixed overhead was $12,400 less than budgeted fixed overhead. Budgeted variable overhead was $5,900 less than the actual variable overhead. The company used an expected actual activity level of 10,400 direct labor hours to compute the predetermined overhead rates. Any overhead variances are closed to Cost of Goods Sold. 3. Prepare a variable-costing income statement. Round your answers to the nearest cent. 4. Reconcile the difference between the two income statements.
Absorption and Variable Costing with Over- and Underapplied Overhead
Flaherty, Inc., has just completed its first year of operations. The unit costs on a normal costing basis are as follows:
Manufacturing costs (per unit):
Direct materials (3 Ibs. @ 1.45)
$4.35
Direct labor (0.4 hr. @ 14.50)
5.80
Variable overhead (0.4 hr. @ 5.00)
2.00
Fixed overhead (0.4 hr. @ 7.00)
2.80
Total
$14.95
Selling and administrative costs:
Variable
$1.70 per unit
Fixed
$218,500
During the year, the company had the following activity:
Units produced
26,000
Units sold
23,400
Unit selling price
$35
Direct labor hours worked
10,400
Actual fixed overhead was $12,400 less than budgeted fixed overhead. Budgeted variable overhead was $5,900 less than the actual variable overhead. The company used an expected actual activity level of
10,400 direct labor hours to compute the predetermined overhead rates. Any overhead variances are dlosed to Cost of Goods Sold.
Required:
1. Compute the unit cost using (a) absorption costing and (b) variable costing.
Unit Cost
15.15 X
Absorption costing
Variable costing
Next
Previous
Transcribed Image Text:Absorption and Variable Costing with Over- and Underapplied Overhead Flaherty, Inc., has just completed its first year of operations. The unit costs on a normal costing basis are as follows: Manufacturing costs (per unit): Direct materials (3 Ibs. @ 1.45) $4.35 Direct labor (0.4 hr. @ 14.50) 5.80 Variable overhead (0.4 hr. @ 5.00) 2.00 Fixed overhead (0.4 hr. @ 7.00) 2.80 Total $14.95 Selling and administrative costs: Variable $1.70 per unit Fixed $218,500 During the year, the company had the following activity: Units produced 26,000 Units sold 23,400 Unit selling price $35 Direct labor hours worked 10,400 Actual fixed overhead was $12,400 less than budgeted fixed overhead. Budgeted variable overhead was $5,900 less than the actual variable overhead. The company used an expected actual activity level of 10,400 direct labor hours to compute the predetermined overhead rates. Any overhead variances are dlosed to Cost of Goods Sold. Required: 1. Compute the unit cost using (a) absorption costing and (b) variable costing. Unit Cost 15.15 X Absorption costing Variable costing Next Previous
3. Prepare a variable-costing income statement. Round your answers to the nearest cent.
Flaherty, Inc.
Variable-Costing Income Statement
For the First Year of Operations
Add:
Contribution margin
Less:
Operating income
Feedback
V Check My Work
Use a contribution margin format income statement that groups costs according to behavior (variable and fixed)
4. Reconcile the difference between the two income statements.
The absorption costing generates an income $
than variable costing.
less
Feedback
0 00
00
Transcribed Image Text:3. Prepare a variable-costing income statement. Round your answers to the nearest cent. Flaherty, Inc. Variable-Costing Income Statement For the First Year of Operations Add: Contribution margin Less: Operating income Feedback V Check My Work Use a contribution margin format income statement that groups costs according to behavior (variable and fixed) 4. Reconcile the difference between the two income statements. The absorption costing generates an income $ than variable costing. less Feedback 0 00 00
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