Ch 7 Hmwk Sol

Ch 7 Hmwk Sol - ACC 202 Ch 7 Homework Solutions Exercise...

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ACC 202 Ch 7 Homework Solutions Exercise 7-1 1. Under absorption costing, all manufacturing costs (variable and fixed) are included in product costs. Direct materials. ........................... R120 Direct labor. .................................. 140 Variable manufacturing overhead. 50 Fixed manufacturing overhead (R600,000 ÷ 10,000 units). ........ 60 Unit product cost. ......................... R370 2. Under variable costing, only the variable manufacturing costs are included in product costs. Direct materials. ........................... R120 Direct labor. .................................. 140 Variable manufacturing overhead. 50 Unit product cost. ......................... R310 Note that selling and administrative expenses are not treated as product costs under either absorption or variable costing; that is, they are not included in the costs that are inventoried. These expenses are always treated as period costs and are charged against the current period’s revenue.
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Exercise 7-2 1. 2,000 units × R60 per unit fixed manufacturing overhead = R120,000 2. The variable costing income statement appears below: Sales. ............................................ R4,000,00 0 Variable expenses: Variable cost of goods sold: Beginning inventory. ................ R 0 Add variable manufacturing costs (10,000 units × R310 per unit). ...................................... 3,100,000 Goods available for sale. .......... 3,100,000 Less ending inventory (2,000 units × R310 per unit) 620,000 Variable cost of goods sold*. ....... 2,480,000 Variable selling and administrative (8,000 units × R20 per unit). .... 160,000 2,640,000 Contribution margin. ..................... 1,360,000 Fixed expenses: Fixed manufacturing overhead. .. 600,000 Fixed selling and administrative. . 400,000 1,000,000 Net operating income. ................... R 360,000 * The variable cost of goods sold could be computed more simply as: 8,000 units sold × R310 per unit = R2,480,000. The difference in net operating income between variable
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Ch 7 Hmwk Sol - ACC 202 Ch 7 Homework Solutions Exercise...

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