Diego Company

Week – 3 Assignment
August 15, 2019
Week 4 Discussion 2
August 19, 2019

Diego Company

The Foundational 15
Variable costs per unit
Manufacturing:
Direct Materials $ 24.00
Direct Labor $ 14.00
Variable manufacturing overhead $ 2.00
Variable selling and administrative $ 4.00
Fixed costs per year
Fixed manufacturing overhead $ 800,000.00
Fixed selling and administrative expenses $ 496,000.00
Variable costing Absorption costing
1 – 2
Direct materials
Direct labor
Variable manufacturing overhead
Fixed manufacturing overhead
Unit product cost
3-4
Sales
Variable expenses:
Variable cost of goods sold
Variable selling and administrative
Contribution margin
Fixed expenses:
Fixed manufacturing overhead
Fixed selling and administrative
Net operating gain (loss)
5-6 Sales
Cost of goods sold
Gross margin
Selling and administrative expenses
Net operating income
7 Variable costing net operating income
Add: fixed manufacturing overhead
deferred in inventory under absorption costing units
Absorption costing net operating income per unit
8 Profit = Unit CM X Q – Fixed expenses
9
10-11 Sales
Variable expenses:
Variable cost of goods sold
Variable selling and administrative
Contribution margin
Fixed expenses:
Fixed manufacturing overhead
Fixed selling and administrative
Net operating gain (loss)
12
13 Total East West
Sales
Variable expenses
Contribution margin
Traceable fixed expenses
Region segment margin
Common fixed expenses
not traceable to regions
Net operating gain (loss)
14 Foregone segment margin in the West region
Additional contribution margin in the East region
Increase (decrease) in profits if the West region is dropped
15. Additional advertising
Additional contribution margin in the West region
Increase in profits
Ethics Challenge
1 Desired Inventory, December 31 units
Expected sales, last quarter units
Total needs units
Less inventory, September 30 units
Required production units
2 Desired Inventory, December 31 units
Expected sales, last quarter units
Total needs units
Less inventory, September 30 units
Required production units
3


 

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