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.     January2007 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:  i) Compute the product cost per meal produced under absorption costing and under variable costing. ii)Prepare the income statement for January 2007 using variable costing  iii) List three situations in which marginal costing, as a technique, aids decision-making.

Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter9: Evaluating Variances From Standard Costs
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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.

 

 

January2007

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:

 i) Compute the product cost per meal produced under absorption costing and under variable costing.

ii)Prepare the income statement for January 2007 using variable costing

 iii) List three situations in which marginal costing, as a technique, aids decision-making.

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