Gia’s Foods produces frozen meals, which it sells for $8 each. The company computes a new monthly fixed manufacturing overhead rate based on the planned number of meals to be produced that month. All costs and production levels are exactly as planned. The following data are from Gia’s Foods first month in business. January 2007 Sales 1,000 meals Production 1,400 meals Variable manufacturing cost per meal $4.00 Sales commission cost per meal $1.00 Total fixed manufacturing overhead $700 Total fixed marketing and administrative costs $600 Requirements: Compute the product cost per meal produced under absorption costing and under variable costing. Prepare the income statement for January 2007 using variable costing List three situations in which marginal costing, as a technique, aids decision-making.
Gia’s Foods produces frozen meals, which it sells for $8 each. The company computes a new monthly fixed manufacturing
January 2007
Sales 1,000 meals
Production 1,400 meals
Variable
Sales commission cost per meal $1.00
Total fixed manufacturing overhead $700
Total fixed marketing and administrative costs $600
Requirements:
- Compute the product cost per meal produced under absorption costing and under variable costing.
- Prepare the income statement for January 2007 using variable costing
- List three situations in which marginal costing, as a technique, aids decision-making.
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