In 2019, TGIT Inc. incurred the following costs:
Direct materials: $5.00 per unit
Direct labor: $4.00 per unit
Variable manufacturing overhead: $3.00 per unit
Fixed manufacturing overhead: $30,000
Variable selling expenses: $1.50 per unit
Fixed selling expenses: $10,000
Costs are unchanged from 2018. Use the costs provided to answer the following questions for each of the following scenarios:
SCENARIO 1: In 2019, TGIT produced 40,000 units and sold 36,000 units. There was no beginning FG inventory and no beginning or ending WIP inventory.
a) For scenario 1, calculate TGIT's product cost per unit in 2019 under a variable costing approach.
$ Answer
b) For scenario 1, calculate TGIT's total selling expenses in 2019 under a variable costing approach.
$ Answer
c) For scenario 1, calculate TGIT's product cost per unit in 2019 under an absorption costing approach.
$ Answer
d) For scenario 1, calculate TGIT's total selling expenses in 2019 under an absorption costing approach.
$ Answer
e) For scenario 1, will TGIT's 2019 net income under absorption costing be higher or lower than under variable costing?
Answer: Higher, Lower, Neither, Unknown. And by how much? Answer
SCENARIO 2: In 2019, TGIT produced 40,000 units and sold 38,000 units. There was no beginning FG inventory and no beginning or ending WIP inventory.
f) For scenario 2, calculate TGIT's product cost per unit in 2019 under an absorption costing approach.
$ Answer
g) Under scenario 2, would both of your answers to the part e) questions be the same as under scenario 1?
Answer: Yes, No, Unknown
SCENARIO 3: In 2019, TGIT produced 40,000 units and sold 36,000 units. There were 2,000 units in beginning FG inventory. There was no beginning or ending WIP inventory. The company produced 40,000 units in 2010 as well.
h) For scenario 3, calculate TGIT's product cost per unit in 2019 under an absorption costing approach.
$ Answer
i) Under scenario 3, would both of your answers to the part e) questions be the same as under scenario 1?
Answer: Yes, No, Unknown
