(Variable and absorption costing) Porta Light manufactures a high quality LED flashlight for home/office use. Data pertaining to the company’s 2010 operations are as follows:
| Production for the year Don't use plagiarized sources. Get Your Custom Essay on how much total expense is charged against revenues in 2010 under absorption costing 641275 Get an essay WRITTEN FOR YOU, Plagiarism free, and by an EXPERT! |
| 45,000 units |
| Sales for the year (sales price per unit, $8) |
| 48,750 units |
| Beginning 2010 inventory |
| 8,750 units |
| Costs to produce one unit (2009 & 2010): |
|
|
| Direct material | $3.60 |
|
| Direct labor | 1.00 |
|
| Variable overhead | 0.60 |
|
| Fixed overhead | 0.40 |
|
| Selling and administrative costs: |
|
|
| Variable (per unit sold) | $0.40 |
|
| Fixed (per year) | $150,000 |
|
Fixed manufacturing overhead is assigned to units of production based on a predetermined OH rate using an expected production capacity of 100,000 units per year.
a. What is budgeted annual fixed manufacturing overhead?
b. If budgeted fixed overhead equals actual fixed overhead, what is underapplied or overapplied fixed overhead in 2010 under absorption costing? Under variable costing?
c. What is the product cost per unit under absorption costing? Under variable costing?
d. How much total expense is charged against revenues in 2010 under absorption costing? Under variable costing?
e. Is income higher under absorption or variable costing? By what amount?
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