Asked by Sheana Serena on May 25, 2024
Verified
Home Base,Inc.reports the following production cost information:
Assume that productions costs have remained the same since the previous period and all units are sold for $137.00 per unit.
a.Compute production cost per unit under variable costing.
b.Compute production cost per unit under absorption costing.
c.Determine net income using variable costing.
d.Determine net income using absorption costing.
Variable Costing
A pricing approach that incorporates only variable production expenses—such as direct materials, direct labor, and variable manufacturing overhead—into the cost of products.
Absorption Costing
A costing method that assigns all manufacturing costs, both fixed and variable, to products.
Net Income
The total earnings of a company after subtracting all expenses from revenue.
- Calculate per unit cost in production and estimate final inventory charges employing variable and absorption costing strategies.
Verified Answer
b.$77 + ($1,940,000/97,000)FOH = $97 per unit under absorption costing
c.NI = ($137 - $77)(92,000 units)- $1,940,000 - $2,000,000 = $1,580,000
d.NI = ($137 - $97)(92,000 units)- $2,000,000 = $1,680,000
Learning Objectives
- Calculate per unit cost in production and estimate final inventory charges employing variable and absorption costing strategies.
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