Arggg. I can't tell if I'm just too tired at this point or I honestly am just not understanding this. Help please!
Question:
Augusta, Inc., expects manufacturing and sales of 70,000 units of product Maggie, its only product, to occur evenly over a 10-week period. Augusta pays for materials in the week following use. The balance of accounts payable for materials at the beginning of the 10-week period is $40,000. There are no beginning inventories. The folÂlowing information pertains to product Maggie for the 10-week period:
Sales price $11 per unit
Materials $3 per unit
Manufacturing conversion costs—Fixed $210,000
Variable $2 per unit
Selling and administrative costs—Fixed $45,000
Variable $1 per unit
Actual results are as budgeted, except that 60,000 of the 70,000 units produced were sold. Using absorpÂtion costing, what is the difference between the reported income and the budgeted net income?
The answer explanation:
Unit sales 60,000 70,000
Revenue $660,000 $770,000
Less COGS 480,000 560,000
Gross profit $180,000 $210,000
Less Fixed selling/admn. 45,000 45,000
Less Variable selling/admn. 60,000 70,000
Net profit $ 75,000 $ 95,000
The difference is pre-tax net income of $20,000 ($95,000 − $75,000).
Here's what I do get:
COGS under the 70,000 units is calculated from [($3+$2) x 70,000 units] + 210,000 fixed cost = $560,000
However, I don't get the 60,000 units' COGS of $480,000.
If I follow the same logic as how I arrived to the 70,000 units' COGS, I get this:
[($3+$2) x 60,000 units] + 210,000 fixed cost = $510,000
What the heck am I missing??
BEC - 80
AUD - 64, 75 - credit lost, 90!!
REG - 73, 74, 83
FAR - 61, 72, 85
Feels good finishing on my best note. Time to watch the mailbox.
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