7. Comparison of direct costing to absorption costing. Hubert Corporation's November income statement, based on direct costing, is as follows: Sales (100,000 units @ $24).. Variable cost of goods sold (100.000 units @ $12). Contribution margin... Less fixed expenses: $2,400,000 1,200,000 $1,200.000 Factory overhead.. Marketing and administrative. Operating income.. S600,000 400,000 1,000,000 $ 200,000 Normal capacity for November is 150,000 units, with 145,000 units produced in November. Required: (1) Prepare the November income statement on an absorption costing basis, with applied factory overhead based on normal capacity and any over- or underapplied factory overhead closed to Cost of Goods Sold. (2) Reconcile and explain the difference between the direct costing and the absorption costing operating income figures. (3) Expiain :he features associated with direct costing income measurement that should be useful to management. (ICMA adapted)

7. Comparison of direct costing to absorption costing. Hubert Corporation's November income statement, based on direct costing, is as follows: Sales (100,000 units @ $24).. Variable cost of goods sold (100.000 units @ $12). Contribution margin... Less fixed expenses: $2,400,000 1,200,000 $1,200.000 Factory overhead.. Marketing and administrative. Operating income.. S600,000 400,000 1,000,000 $ 200,000 Normal capacity for November is 150,000 units, with 145,000 units produced in November. Required: (1) Prepare the November income statement on an absorption costing basis, with applied factory overhead based on normal capacity and any over- or underapplied factory overhead closed to Cost of Goods Sold. (2) Reconcile and explain the difference between the direct costing and the absorption costing operating income figures. (3) Expiain :he features associated with direct costing income measurement that should be useful to management. (ICMA adapted)

Name: on normal capacity and assuming factory overhead variances are not(3)
Uploaded: 2024-03-20T06:32:49.000Z
Channel: Bartleby
Description: on normal capacity and assuming factory overhead variances are not(3) Absorption costing, using actual prime cost and applied factory overhead, based7. Comparison of direct costing to absorption costing. Hubert Corporation's(CGAAC adapted)prorated.7

Principles of Cost Accounting

17th Edition

ISBN:9781305087408

Author:Edward J. Vanderbeck, Maria R. Mitchell

Publisher:Edward J. Vanderbeck, Maria R. Mitchell

Chapter4: Accounting For Factory Overhead

Section: Chapter Questions

Problem 3P: Scattergraph method Using the data in P4-2 and a piece of graph paper: 1. Plot the data points on...

See similar textbooks

Similar questions

Method of Least Squares, Predicting Cost for Different Time Periods from the One Used to Develop a Cost Formula Refer to the information for Farnsworth Company on the previous page. However, assume that Tracy has used the method of least squares on the receiving data and has gotten the following results: Required: 1. Using the results from the method of least squares, prepare a cost formula for the receiving activity. 2. Using the formula from Requirement 1, what is the predicted cost of receiving for a month in which 1,450 receiving orders are processed? (Note: Round your answer to the nearest dollar.) 3. Prepare a cost formula for the receiving activity for a quarter. Based on this formula, what is the predicted cost of receiving for a quarter in which 4,650 receiving orders are anticipated? Prepare a cost formula for the receiving activity for a year. Based on this formula, what is the predicted cost of receiving for a year in which 18,000 receiving orders are anticipated?
Grand Canyon Manufacturing Inc. produces and sells a product with a price of 100 per unit. The following cost data have been prepared for its estimated upper and lower limits of activity: Overhead: Selling and administrative expenses: Required: 1. Classify each cost element as either variable, fixed, or semi-variable. (Hint: Recall that variable expenses must go up in direct proportion to changes in the volume of activity.) 2. Calculate the break-even point in units and dollars. (Hint: First use the high-low method illustrated in Chapter 4 to separate costs into their fixed and variable components.) 3. Prepare a break-even chart. 4. Prepare a contribution income statement, similar in format to the statement appearing on page 540, assuming sales of 5,000 units. 5. Recompute the break-even point in units, assuming that variable costs increase by 20% and fixed costs are reduced by 50,000.
To determine the effect of different levels of production on the company’s income, move to cell B7 (Actual production). Change the number in B7 to the different production levels given in the table below. The first level, 100,000, is the current level. What happens to the operating income on both statements as production levels change? Enter the operating incomes in the following table. Does the level of production affect income under either costing method? Explain your findings.
When the number of units in ending inventory increases through the year, which of the following is true? A. Net income is the same for variable and absorption costing. B. Net income is higher for variable costing than for absorption costing. C. Net income is higher for absorption costing than for variable costing. D. There is no relationship between net Income and the costing method.
Summarized data for Backdraft Co. for its first year of operations are as follows: A. Prepare an income statement under absorption costing B. Prepare an income statement under variable costing
Using the data in P4-2 and Microsoft Excel: 1. Separate the variable and fixed elements. 2. Determine the cost to be charged to the product for the year. 3. Determine the cost to be charged to factory overhead for the year. 4. Determine the plotted data points using Chart Wizard. 5. Determine R2. 6. How do these solutions compare to the solutions in P4-2 and P4-3? 7. What does R2 tell you about this cost model?
The following data were adapted from a recent income statement of The Procter Gamble Company (PG): Assume that the variable amount of each category of operating costs is as follows: a. Based on the data given, prepare a variable costing income statement for Procter Gamble, assuming that the company maintained constant inventory levels during the period. b. If Procter Gamble reduced its inventories during the period, what impact would that have on the operating income determined under absorption costing?
Scattergraph method Using the data in P4-2 and a piece of graph paper: 1. Plot the data points on the graph and draw a line by visual inspection, indicating the trend shown by the data points. 2. Determine the variable cost per unit and the total fixed cost from the information on the graph. 3. Determine the variable cost to be charged to the product for the year. 4. Determine the fixed cost to be charged to factory overhead for the year. 5. Do these answers agree with the answers to P4-2? Why or why not?
In the variable costing income statement, how are the fixed manufacturing costs reported, and how are the fixed selling and administrative expenses reported?
6. The Fixed and variable costs are costs classification according to: A) Cost traceability B) Value-adding C) Financial reporting Rectangular Snip 7. Cost can be conveniently and economically traced to a cost objected, For example, the salary of factory workers or the raw materials of a product. Consider as: A) Indirect Cost B) Direct Cost C) Non-of the above 8. What is the product unit cost for perfume, which consists of 1000 units and has total direct materials of 8,000 $ and direct labor of 1,500, and overhead is 4,500? A) 14 B) 9.5 C) 14,000 9. July Co. at the end of the financial, The actual overhead costs incurred were 79,950 and the amount applied to the production was 82,000. Therefore the amount of overhead cost is : A) Overapplied B) Underapplied C) None of the above
June Company's actual data for 201A are given as follows: Units produced Units sold Selling price per unit Direct material costs Direct labor Variable manufacturing overhead Variable selling costs Fixed manufacturing costs Fixed administrative costs 25,000 24,000 P200 30 20 60 20 P600,000 300,000 Required: Prepare an income statement under (1) absorption costing, (2) variable costing, and (3) throughput costing.
Lillibridge & Friends, Incorporated provides you with the following data for its single product: Sales price per unit Fixed costs (per quarter): Selling, general, and administrative (SG&A) Manufacturing overhead Variable costs (per unit): Direct labor Direct materials Manufacturing overhead SG&A Number of units produced per quarter a. Prime cost per unit b. Contribution margin per unit c. Gross margin per unit d. Conversion cost per unit e. Variable cost per unit Required: Compute the amounts for each of the following assuming that the production levels are within the relevant range if the number of units is 500,000 per quarter. Also calculate if the number of units increases to 600,000 per quarter. Note: Do not round intermediate calculations. Round your answers to 2 decimal places. f. Full absorption cost per unit g. Variable production cost per unit h. Full cost per unit $ 140 1,500,000 4,500,000 $ 17 20 18 14 500,000 units 500,000 units 600,000 units 37.00 $ $ 37.00 55.00 $ 55.00