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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 (2 lbs. @ 1.30) Direct labor (0.4 hr. 17.50) Variable overhead (0.4 hr. 5.00) Fixed overhead (0.4 hr. 8.00) Total Selling and administrative costs: Variable Fixed $2.60 7.00 2.00 3.20 $14.80 $1.60 per unit $218,000 During the year, the company had the following activity: Units produced Units sold Unit selling price Direct labor hours worked 26,500 23,850 $36 10,600 Actual fixed overhead was $13,600 less than budgeted fixed overhead. Budgeted variable overhead was $4,500 less than the actual variable overhead. The company used an expected actual activity level of 10,600 direct labor hours to compute the predetermined overhead rates. Any overhead variances are closed to Cost of Goods Sold

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 (2 lbs. @ 1.30) Direct labor (0.4 hr. 17.50) Variable overhead (0.4 hr. 5.00) Fixed overhead (0.4 hr. 8.00) Total Selling and administrative costs: Variable Fixed $2.60 7.00 2.00 3.20 $14.80 $1.60 per unit $218,000 During the year, the company had the following activity: Units produced Units sold Unit selling price Direct labor hours worked 26,500 23,850 $36 10,600 Actual fixed overhead was $13,600 less than budgeted fixed overhead. Budgeted variable overhead was $4,500 less than the actual variable overhead. The company used an expected actual activity level of 10,600 direct labor hours to compute the predetermined overhead rates. Any overhead variances are closed to Cost of Goods Sold

FINANCIAL ACCOUNTING
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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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 (2 lbs. @ 1.30) Direct labor (0.4 hr. @ 17.50) Variable overhead (0.4 hr. @ 5.00) Fixed overhead (0.4 hr. @ 8.00) Total Selling and administrative costs: Variable Fixed $2.60 7.00 2.00 3.20 $14.80 $1.60 per unit $218,000 During the year, the company had the following activity: Units produced Units sold Unit selling price Direct labor hours worked 26,500 23,850 $36 10,600 Actual fixed overhead was $13,600 less than budgeted fixed overhead. Budgeted variable overhead was $4,500 less than the actual variable overhead. The company used an expected actual activity level of 10,600 direct labor hours to compute the predetermined overhead rates. Any overhead variances are closed to Cost of Goods Sold.
Transcribed Image Text: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 (2 lbs. @ 1.30) Direct labor (0.4 hr. @ 17.50) Variable overhead (0.4 hr. @ 5.00) Fixed overhead (0.4 hr. @ 8.00) Total Selling and administrative costs: Variable Fixed $2.60 7.00 2.00 3.20 $14.80 $1.60 per unit $218,000 During the year, the company had the following activity: Units produced Units sold Unit selling price Direct labor hours worked 26,500 23,850 $36 10,600 Actual fixed overhead was $13,600 less than budgeted fixed overhead. Budgeted variable overhead was $4,500 less than the actual variable overhead. The company used an expected actual activity level of 10,600 direct labor hours to compute the predetermined overhead rates. Any overhead variances are closed to Cost of Goods Sold.
Compute the unit cost using (a) absorption costing and (b) variable costing. Unit Cost Absorption costing Variable costing Prepare an absorption-costing income statement. Round your answers to the nearest cent. Flaherty, Inc. Absorption-Costing Income Statement For the First Year of Operations Less: Gross profit Operating income 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: Less: Contribution margin Operating income Reconcile the difference between the two income statements. The absorption costing generates an income than variable costing.
Transcribed Image Text:Compute the unit cost using (a) absorption costing and (b) variable costing. Unit Cost Absorption costing Variable costing Prepare an absorption-costing income statement. Round your answers to the nearest cent. Flaherty, Inc. Absorption-Costing Income Statement For the First Year of Operations Less: Gross profit Operating income 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: Less: Contribution margin Operating income Reconcile the difference between the two income statements. The absorption costing generates an income than variable costing.
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