Fresh Air Products manufactures and sells a variety of camping products. Recently, the company...

Question:

Fresh Air Products manufactures and sells a variety of camping products.

Recently, the company opened a new plant to manufacture a deluxe portable cooking unit.

Cost and sales data for the first month of operations are shown below:

Beginning inventory 0 units
Units produced 10,000
Units sold 8,900
Manufacturing costs:
Fixed overhead $80,000
Variable overhead $7 per unit
Direct labour $11 per unit
Direct material $26 per unit
Selling and administrative costs:
Fixed $195,500
Variable $4 per unit sold

The portable cooking unit sells for $111. Management is interested in the opening month's results and has asked for an income statement.

a) Calculate the manufacturing cost per unit.

b) Prepare a variable-costing income statement for the first month of operation.

What Are Variable Costs:

Variable costs are costs that by nature vary based on the number of units produced during the period. Examples of variable costs include direct materials, direct labor wages, and variable manufacturing overhead.

Answer and Explanation: 1

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a.

Manufacturing cost per unit = Fixed cost/number of units + variable cost per unit

=80,000/10,000+7+11+26

=$52

b.

Sales = 8,900*111$987,900
Va...

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Variable Cost: Definition, Formula & Examples

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Chapter 23 / Lesson 7
70K

Understand variable cost in business. Learn the definition of variable cost, the variable cost formula, and how to use the formula to calculate the variable cost.


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