Q37CT
Question
Using Excel for variable costing
Download an Excel template for this problem online in MyAccountingLab or at http://www.pearsonhighered.com/Horngren. Tiger Mountain Gelato incurs the following costs for its premium ice cream in May 2018:
Direct materials cost per pint $ 2.50 per pint
Direct labor cost per pint 0.75 per pint
Variable manufacturing overhead cost per pint 0.25 per pint
Fixed manufacturing overhead costs 6,000 per month
Total fixed selling and administrative costs 5,000 per month
Sales price per pint 8.00 per pint
Pints of gelato produced 12,000 pints
Pints of gelato sold 11,500 pints
There were no beginning inventories, so Tiger Mountain Gelato has 500 pints in ending Finished Goods Inventory (12,000 pints produced less 11,500 pints sold).
Requirements
1. Calculate Tiger Mountain Gelato’s product cost per pint under absorption costing and variable costing.
2. Calculate the balance in Finished Goods Inventory on May 31, 2018, using absorption costing and variable costing.
3. Prepare income statements in good form for Tiger Mountain Gelato for May 2018 using absorption costing and variable costing.
4. Reconcile the differences between operating incomes and Finished Goods Inventory balances between the two-costing method
Step-by-Step Solution
VerifiedAnswer
1. The product cost per unit under absorption and variable costing is $4 and $3.50 respectively.
2. The finished goods inventory under absorption and variable costing is $2,000 and $1,750 respectively.
3. The operating income under absorption and variable costing is $41,000 and $41,750 respectively.
- Use the selections in the drop-down menu to select the correct description.
- Use cell references to point to the correct unit or dollar amount from the data table
| Absorption costing | Variable costing | |
| Direct materials cost per pint | $ 2.50 | $2.50 |
| Direct labor cost per pint | $0.75 | $0.75 |
Variable manufacturing overhead cost per pint | $0.25 | $0.25 |
| Fixed manufacturing overhead costs | $0.50 | |
| Product cost per unit | $4.00 | $3.50 |
- Use cell references to point to the units produced and the units sold.
| Beginning Inventory in units | 0.00 |
| Units Produced for sale | 12,000.00 |
| Units available for sale | 12,000 |
| Units sold | 11,500 |
| Ending Inventory in units | 500 |
- Use cell references to point to the correct product cost.
| Absorption costing | Variable costing | |
| Ending Inventory in units | 500 | 500 |
| Product cost per unit | 4 | 4 |
| Balance in finished goods Inventory | 2,000 | 1,750 |
- Use the selections in the drop-down menu to select the correct description.
- Use cell references in the formula to point to the selling price per unit, product cost per unit and units sold from the data table.
- Indent the descriptions for any subtotals using the increase indent button, Double underline operating income.
| Absorption costing | |
| Net sales Revenue | $92,000 |
| Cost of goods sold | $46,000 |
| Gross profit | $46,000 |
| Selling & Administrative costs (fixed) | $5,000.00 |
| Operating Income | $41,000.00 |
Finished goods inventory, ending balance | $2,000.00 |
| Variable costing | ||
| Net sales Revenue | $92,000 | |
Variable cost of goods sold | $40,250 | |
| Contributing margin | $51,750 | |
| Fixed costs: | ||
| Fixed manufacturing overhead | 6,000 | |
| Fixed selling & administrative overhead | 5,000 | $11,000.00 |
| Operating Income | $41,750 | |
Finished goods inventory, ending balance | $1,750.00 | |
- Use cell references to point to the correct amounts.
- Use the ABS function (absolute value) to calculate the difference between operating and finished goods Inventory.
| Absorption costing | Variable costing | Difference | |
| Operating Income | 41,000 | 41,750 | 750 |
Finished goods Inventory, ending balance | 2,000 | 1,750 | 250 |