Pacheo Corporation, which has only one product, has provided the following data concerning its most recent month of operations: Selling price$108Units in beginning inventory 770Units produced 2,400Units sold 2,850Units in ending inventory 320Variable costs per unit: Direct materials$23Direct labor$24Variable manufacturing overhead$2Variable selling and administrative expense$11Fixed costs: Fixed manufacturing overhead$57,600Fixed selling and administrative expense$5,700 The company produces the same number of units every month, although the sales in units vary from month to month. The company's variable costs per unit and total fixed costs have been constant from month to month. Required:a. What is the unit product cost for the month under variable costing?b. Prepare a contribution format income statement for the month using variable costing.c. Without preparing an income statement, determine the absorption costing net operating income for the month. (Hint: Use the reconciliation method.)

Under absorption costing, manufacturing costs are considered product costs and included in inventory. Under variable costing, variable production costs are assigned to inventory and cost of goods sold.(a)(b)(c)

Answered: Pacheo Corporation, which has only one…

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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Pacheo Corporation, which has only one product, has provided the following data concerning its most recent month of operations:


Selling price	$	108
Units in beginning inventory		770
Units produced		2,400
Units sold		2,850
Units in ending inventory		320
Variable costs per unit:
Direct materials	$	23
Direct labor	$	24
Variable manufacturing overhead	$	2
Variable selling and administrative expense	$	11
Fixed costs:
Fixed manufacturing overhead	$	57,600
Fixed selling and administrative expense	$	5,700

The company produces the same number of units every month, although the sales in units vary from month to month. The company's variable costs per unit and total fixed costs have been constant from month to month.

Required:

a. What is the unit product cost for the month under variable costing?

b. Prepare a contribution format income statement for the month using variable costing.

c. Without preparing an income statement, determine the absorption costing net operating income for the month. (Hint: Use the reconciliation method.)

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