Managerial Accounting: P5-17 The following information relates to Jorgensen Manufacturing

Important Reminder!!! There might be other versions of this problem - amounts and dates have been changed - so please make sure you review and compare this tutorial to the problem in your homework. Even with different amounts, format and way of solving the problem is still the same so pleases be guided accordingly.

Managerial Accounting
5-17 Variable and Full Costing Income (Comprehensive Problem)
The following information relates to Jorgensen Manufacturing for calendar year 2011, the company’s first year of operation:
Units produced 8,000
Units sold 7,000
Ending inventory 1,000

Selling price per unit 4,500
Direct material per unit 2,000
Direct labor per unit 1,200
Variable manufacturing overhead per unit 900
Variable selling cost per unit 225
Annual fixed manufacturing overhead 800,000
Annual fixed selling and administrative expense 400,000

a. Prepare an income statement using full costing.
b. Prepare an income statement using variable costing
c. Calculate the amount of fixed manufacturing overhead that will be included in ending inventory under full costing and reconcile it to the difference between incomes computed under variable and full costing.
d. Suppose that the company sold 8,000 units during the year. What would the variable costing net income have been? What would the full costing net income have been?
Powered by