Absorbtion Costing VS Variable Costing

a. What would pretax profit be in 1961? Booker Jones “other operating costs” increased from 1960 to 1961 primarily because of the cost of the barrels used, the occupancy costs and the warehousing costs. This is understandable because Booker Jones decided to increase production which would require 20,000 more barrels. If the cost of barrels is $31.50, then these 20,000 barrels would have cost $630,000. This is precisely why the cost of barrels used went up from 1960 to 1961. If these barrels were not considered an “Other Operating Cost” but instead

1- The total unit cost = Total Variable Cost + Production Fixed Expenses + Advertising Expense + Selling and Administrative Expense = 3.23 + 1.20 + 0.30 + 0.19 = 4.92.

The other assumptions of the management are that the selling price for goods will be the same in 2007 and that top line growth will be 3% assuming no acquisition in 2007. If in 2007, the

Case: Sorrell Ridge a. What are Sorrell Ridge's sources of negotiating power and weaknesses?  What about Bromar’s? This case is about the slotting allowance when Allied Old English Company wants to introduce the Sorrell Ridge spreadable fruit product into the California market. Considering the factors including product itself,

Question 1 2008 Variable manufacturing cost as a percentage of selling price Product (Variable manufacturing cost/WSP Production) Mark up Lipstick 16.8/21 80% (21/16.8)-1 25% Nail polish 10.5/15 70% (15/10.5)-1 43% Creams 2.8/5.6 50% (5.6/2.8)-1 100% 2010 Product Lipstick 15.3/18 85% (18/15.3)-1 18% Nail polish 9.3/11.6 80% (11.6/9.3)-1 25% Creams 3.3/6.6 50% (6.6/3.3)+1 100% *Note that these calculations are done for goods produced in the year in question Question 2 (cost of goods manufactured in 2008/ sales value for units produced in 2008) * ending inventory 2008

| AmountPer Unit | Direct Materials | $ 6.00 | Direct Labor | 3.50 | Variable Manufacturing Overhead | 1.50 | Fixed Manufacturing Overhead | 4.00 | Fixed Selling Expenses | 3.00 | Fixed Administrative Expense | 2.00 | Sales Commissions | 1.00 | Variable Administration Expense | 0.50 | Required: 1. For financial accounting purposes, what is the total amount of product costs incurred to make 10,000 units?

First, let us determine the revenue generated from the 4 items Item Patterned glasses Paperwights Wrapped tumblers Vases Weekly Production 19 10 32 8 Yearly Production 760 400 1280 320 2760 Price/unit ($) 9 15 8 25 Revenue ($) 6840 6000 10240 8000 31080 Total number of products produced in a year = 2760 Total revenue generated = $31,080 Raw materials cost/year = $ $856.80 ~ $857 In order to calculate operating costs, we need to take into account the depreciation of the assets from the balance

Assume that the number of units actually sold each year will be the lesser of the demand and the production capacity.

Absorption Costing Versus Variable Costing 5 bsorption Costing Versus Variable Costing Absorption Method q1 q2 Year Year Period End Mar 31,'12 Jun 30,'12 2012 2011 Production Budget 25,000 50,000 125,000 100,000 Sales 2,500,000 2,500,000 10,000,000 10,000,000 Cost of Goods Sold 1,625,000 1,625,000 6,500,000 6,500,000 Gross Profit 875,000 875,000 3,500,000 3,500,000 Selling & Admin Exp 500,000 500,000 2,000,000 2,000,000 Net Income 375,000 375,000 1,500,000 1,500,000 Cost of Goods Sold Beg Inventory 650,000 650,000 650,000 650,000 Product Cost 1,625,000 3,250,000 8,125,000 6,500,000 Total 2,275,000 3,900,000 8,775,000 7,150,000 End Inventory 650,000 2,275,000 2,275,000 650,000 Cost of Goods Sold 1,625,000 1,625,000 6,500,000 6,500,000 Prod cost per unit 65 65 Variable Method q1 q2 Year Year Period End Mar 31, '12 Jun 30, '12 2012 2011 Production Budget 25,000 50,000 125,000 100,000 Sales 2,500,000 2,500,000 10,000,000 10,000,000 Var

Danshui Plant No.2 to break even? Variable Costs: 187.89 + 13.11 + 1.06 = $202.06 per unit Fixed Costs: $729,000 per month Revenue: 41,240 / 200 = $206.2 per unit Contribution Margin = 206.2 - 202.06 = $4.14 per unit Break-even = 729,000 / 4.14 = 176,086.96 units Answer : 176,087 iPhones 2. Using budget data, what was the total expected cost per unit if all manufacturing and

no allowance for any overtime premium in the manufacturing overhead rate. Swift’s standard markup policy for new products is 25 per cent of absorption manufacturing cost. Required: 1. Assume Swift Ltd has decided to submit a bid for a 25 000 kilogram order of Taylor’s new

First, the net sales will have to be determined for each customer: Type 1 Type 2 Type 3 Type 4 Sales (given) $1000 $1000 $2500 $3000 Value of returns - $0 - $200 -$500 -$1500 Net sales (total) $1000 $800 $2000 $1500 Secondly, the cost of goods sold and the cost driver rates for each activity will have to be totaled and then subtracted from the net sales:

Now you add that to the cost per unit manufactured on Table 1 ($48) to get a total of $60 per unit manufactured. When the company only produced 25,000 units the cost was $72 per unit. ((600,000/25,000) + $48 = $72). Now the excess fixed manufacturing costs are rolled into inventory for the next quarter. As shown in the less ending inventory in Table 3 ($1,500,000), because 25,000 units of the units manufactured were not sold. Contribution margin or variable costing does not break up the fixed manufacturing costs, instead it puts in the entire amount of $600,000 into the quarter and does not roll over the fixed costs into inventory. (As shown in the line fixed manufacturing overhead below the contribution margin.) However, in variable costing, $48 of manufacturing cost per unit is rolled over in the inventory. Because variable costing accounts for the fixed costs entirely it is the better option for knowing where your company stands.

| C | the amount of cost placed into production during the period. | D | the amount of cost of goods Determine the equivalent units of production for materials and conversion costs. b. Determine the cost per equivalent unit for materials and conversion costs. c. Determine the cost of units transferred out of the department during the month. d. Determine the cost of ending work in process inventory in the department. Page 5 Solo Company is a small merchandising firm. During the next month, the company expects to sell 500 units. The company has the following revenue and cost structure:

|Course Code |MBA 625