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Question Completion:
Crystal Clear Corporation manufactures and sells 50-inch television sets and uses standard costing. Actual data relating to January, February, and March 2014 are as follows:
Unit data January February March
Beginning inventory 0 100 100
Production 1,400 1,375 1,430
Sales 1,300 1,375 1,455
Variable Costs
Manufacturing cost
per unit produced 950 950 950
Operating (marketing)
cost per unit sold 725 725 725
Fixed Costs
Manufacturing costs 490,000 490,000 490,000
Operating (marketing) costs 120,00 120,000 120,000
Answer:
Crystal Clear
1. Income Statements in January, February, and March 2014:
a. Variable Costing Income Statement
January February March
Sales Revenue $4,550,000 $4,812,500 $5,092,500
Variable cost of goods 2,177,500 2,303,125 2,437,125
Contribution margin $2,372,500 $2,509,375 $2,655,375
Fixed Costs
Manufacturing costs 490,000 490,000 490,000
Operating (marketing) 120,000 120,000 120,000
Total fixed costs $610,000 $610,000 $610,000
Net operating income $2,371,800 $1,899,375 $2,045,375
b. Absorption Costing Income Statement
January February March
Sales Revenue $4,550,000 $4,812,500 $5,092,500
Cost of goods sold 1,690,000 1,795,750 1,881,315
Gross profit $2,860,000 $3,016,750 $3,211,185
Total operating costs 1,062,500 1,116,875 1,174,875
Net operating income $1,797,500 $1,899,875 $2,036,310
2. The difference in the operating incomes for January, February, and March under variable costing and absorption costing is due to the way the fixed cost per month is accounted for in cost of goods sold and ending inventory. With variable costing, all variable costs are included, while absorption includes both variable and fixed manufacturing costs. This makes the ending inventory of variable costing to be carried forward to the next period while absorption costing includes every fixed cost as period costs.
Explanation:
a) Data and Calculations:
Unit data January February March
Beginning inventory 0 100 100
Production 1,400 1,375 1,430
Sales 1,300 1,375 1,455
Ending inventory 100 100 75
Variable Costs
Manufacturing cost
per unit produced 950 950 950
Operating (marketing)
cost per unit sold 725 725 725
Fixed Costs
Manufacturing costs 490,000 490,000 490,000
Operating (marketing) costs 120,00 120,000 120,000
Cost of production:
Variable Costs
Manufacturing cost
per unit produced $1,330,000 $1,306,250 $1,358,500
(1,400 * $950) (1,375 * $950) (1,430 * $950)
Fixed Costs
Manufacturing costs 490,000 490,000 490,000
Total production costs $1,820,000 $1,796,250 $1,848,500
Production units 1,400 1,375 1,430
Unit cost of production $1,300 $1,306 $1,293
Sales Units 1,300 1,375 1,455
Cost of goods sold $1,690,000 $1,795,750 $1,881,315
Operating (marketing) (1,300*$725) (1,375*$725) (1,455*$725)
cost per unit sold
Variable operating cost $942,500 $996,875 $1,054,875
Fixed Costs
Operating (marketing) costs 120,000 120,000 120,000
Total operating costs $1,062,500 $1,116,875 $1,174,875
Variable Costs
Manufacturing cost
per unit produced 950 950 950
Operating (marketing)
cost per unit sold 725 725 725
Total per unit variable cost $1,675 $1,675 $1,675
Sales Units 1,300 1,375 1,455
Total variable cost of goods
sold = $2,177,500 $2,303,125 $2,437,125
