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Darwin Company manufactures only one product that it sells for $200 per unit. The company uses plantwide overhead cost allocation based on the number of units produced. It provided the following estimates at the beginning of the year:

Number of units produced		50,000
Total fixed manufacturing overhead costs	$	1,000,000
Variable manufacturing overhead per unit produced	$	12

During the year, the company had no beginning inventories of any kind and no ending raw materials or work in process inventories. All raw materials were used in production as direct materials. An unexpected business downturn caused annual sales to drop to 38,000 units. In response to the decline in sales, Darwin decreased its annual production to 40,000 units. The companys actual costs for the year were as follows:

Variable costs per unit:
Manufacturing:
Direct materials	$	78
Direct labor	$	60
Variable manufacturing overhead	$	12
Variable selling and administrative	$	15
Fixed costs per year:
Fixed manufacturing overhead	$	1,000,000
Fixed selling and administrative expenses	$	350,000

Required:

1. Assuming the company uses normal costing (as described in Chapters 2 and 3): a. Compute the plantwide predetermined overhead rate. b. Compute the unit product cost for each unit produced during the year. c. Prepare a schedule of cost of goods manufactured and a schedule of cost of goods sold. Assume that any underapplied or overapplied overhead is closed entirely to cost of goods sold. d. Compute absorption costing net operating income for the year.

Prepare a schedule of cost of goods manufactured and a schedule of cost of goods sold. Assume that any underapplied or overapplied overhead is closed entirely to cost of goods sold.

Compute the plantwide predetermined overhead rate

	Plantwide predetermined overhead rate per unit

Compute the unit product cost for each unit produced during the year.

	Unit product cost

	Darwin Company Cost of Goods Manufactured Direct materials: ? ? Total raw materials available 0 ? Raw materials used in production $0 ? ? Total manufacturing costs 0 ? ? 0 ? Cost of goods manufactured $0 ? Cost of Goods Sold ? ? Cost of goods available for sale 0 ? Unadjusted cost of goods sold 0 ? Adjusted cost of goods sold $0

Compute absorption costing net operating income for the year.

	Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating income

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