Jarvis Golf Company sells a special putter for $20 each. In March, it sold 28,000 putters while ...

 
a.AbsorptionVariable
Direct manufacturing labor ($24/4)$ 6.00$ 6.00
Direct materials2.002.00
Variable manufacturing overhead4.004.00
Fixed manufacturing overhead ($132,000/30,000)4.400

Total cost per unit$16.40$12.00

b.AbsorptionVariable
Beginning inventory$0$0

Cost of goods manufactured:
30,000  $16.40$492,000
30,000  $12.00________$360,000

Cost of goods available for sale$492,000$360,000

Cost of goods sold:
28,000  $16.40$459,200
28,000  $12.00________$336,000

Ending inventory$ 32,800$ 24,000

 
c.Absorption-costing income statement:

Sales (28,000  $20)$560,000
Cost of goods sold (28,000  $16.40)459,200

Gross margin100,800
Less:
Variable selling and administrative$56,000
Fixed selling and administrative40,00096,000

Operating income$ 4,800

Variable-costing income statement:

Sales (28,000  $20)$560,000
Variable COGS (28,000  $12)$336,000
Variable selling expenses (28,000  $2)56,000392,000

Contribution margin168,000
Fixed costs:
Manufacturing$132,000
Selling and administrative40,000172,000

Operating income$ (4,000)