Anatase, Inc Assume That the Production Costs and Sales Prices Were the |

question 54

Essay

Anatase, Inc. reports the following information:
$$\begin{array} { | l | r | l | } \hline \text { Units produced } & 2,500 & \text { units } \\\hline \text { Units sold } & 2,000 & \text { units } \\\hline \text { Sales price } & \$ 200 & \text { per unit } \\\hline \text { Direct materials } & \$ 40 & \text { per unit } \\\hline \text { Direct labor } & \$ 25 & \text { per unit } \\\hline \text { Variable manufacturing overhead } & \$ 20 & \text { per unit } \\\hline \text { Fixed manufacturing overhead } & \$ 90,000 & \text { per year } \\\hline \text { Variable selling and administrative costs } & \$ 15 & \text { per unit } \\\hline \text { Fixed selling and administrative costs } & \$ 75,000 & \text { per year } \\\hline\end{array}$$ 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.

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Definitions:

Price Inflation

The rate of growth in the overall price levels for goods and services, cutting down on purchasing capacity.

Real Price

The cost of a product or service once inflation has been taken into account, showing its true ability to purchase.

Arbitraging

The practice of buying a product or asset in one market and selling it in another to profit from a difference in price between the two markets.

Transportation Costs

Expenses involved in moving goods or services from one location to another.