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 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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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.
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