1. Oxygen, Inc. reports the following information: Units produced 2,500 units Units sold 2,000 units Sales price $200 per unit Direct materials $40 per unit Direct labor $25 per unit Variable manufacturing overhead $20 per unit Fixed manufacturing overhead $90,000 per year Variable selling and administrative costs $15 per unit Fixed selling and administrative costs $75,000 per year Assume that the production costs and sales prices were the same in the previous year. Assume no beginning inventories. Requirements: a) Calculate unit product cost using absorption costing and variable costing. b) Calculate the operating income using absorption costing and variable costing

Solution and Explanation:

a.

Absorption costing

Direct material  40

Direct labor  25

Variable manufacturing overhead  20

Fixed manufacturing overhead (90,000/2,500)  36

Unit product cost  $121

Unit product cost using absorption costing = $121

Variable costing

Direct material  40

Direct labor  25

Variable manufacturing overhead  20

Unit product cost  $85

Unit product cost using variable costing = $85

b. Absorption costing income statement

Sales (2,000 x 200)  400,000

Cost of goods sold :    

Direct material (2,000 x 40)  80,000  

Direct labor (2,000 x 25)  50,000  

Varoiable manufacturing overhead (2,000 x 20)  40,000  

Fixed manufacturing overhead (90,000 x 2,000/2,500  72,000  

Cost of goods sold  -242,000

Gross profit  158,000

Operating expense :    

Variable selling and administrative expense (2,000 x 15)  30,000  

Fixed selling and administrative expense  75,000  

Total operating expense  -105,000

Net operating income  $53,000

Variable costing income statement

Sales (2,000 x 200)  400,000

Variable cost :    

Direct material  80,000  

Direct labor  50,000  

Varoiable manufacturing overhead  40,000  

Variable selling and administrative expense  30,000  

Total variable cost  -200,000

Contribution margin  200,000

Fixed cost :    

Fixed manufacturing overhead  90,000  

Fixed selling and administrative expense  75,000  

Total fixed cost  -165,000

Net operating income  $35,000

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henry is an economist and wants to understand the relationship between inflation and consumer spending habits. for his research, he needs the consumer price index for 2014 and the inflation rate. based on the prices of goods given, what will he find to be the cpi and inflation rate for 2014? assume that a consumer’s basket for three consecutive years consists of the following:

you dont privide answer choices.

answer - 15% of a inflatation rate is 15% less in cpi