APL, Inc. began operations on January 1, 2016. The company does not generally carry Work in Process Inventories at the end of the year. Variable product costs per unit were the same for 2016, 2017 and 2018 and total $68 per unit. Total Fixed Overhead Costs are $600,000 per year. Variable Selling and Administrative Costs are $9 for each unit sold. Fixed Selling and Administrative Costs are $230,000 per year. The Selling Price is $450 per unit for all three years. Production and Sales figures (in units) for three years are below. 2016 2017 2018 Production (units) 4,000 units 5,000 units 3,000 units Sales (units) 2,000 units 2,500 units 5,000 units The company uses the FIFO method to assign cost to any units left in ending Finished Goods Inventory. TASKS: A. Prepare, in good form (to include a proper heading), two Income Statements for 2017: One using Absorption Costing and one using Variable Costing. Use the formats that I used in the class example for Chapter 6. Then, prepare a Reconciliation to explain the difference in the Net Income figures. Again, use the format that I used in the class example. B. Now, assume that the Variable Costing Net Income is $1,035,000 for 2018. Prepare a Reconciliation Schedule to compute the Absorption Costing Net Income for the same year. DO NOT PREPARE AN ABSORPTION COSTING INCOME STATEMENT.
APL, Inc. began operations on January 1, 2016. The company does not generally carry Work in Process Inventories at the end of the year. Variable product costs per unit were the same for 2016, 2017 and 2018 and total $68 per unit. Total Fixed Overhead Costs are $600,000 per year. Variable Selling and Administrative Costs are $9 for each unit sold. Fixed Selling and Administrative Costs are $230,000 per year. The Selling Price is $450 per unit for all three years. Production and Sales figures (in units) for three years are below. 2016 2017 2018 Production (units) 4,000 units 5,000 units 3,000 units Sales (units) 2,000 units 2,500 units 5,000 units The company uses the FIFO method to assign cost to any units left in ending Finished Goods Inventory. TASKS: A. Prepare, in good form (to include a proper heading), two Income Statements for 2017: One using Absorption Costing and one using Variable Costing. Use the formats that I used in the class example for Chapter 6. Then, prepare a Reconciliation to explain the difference in the Net Income figures. Again, use the format that I used in the class example. B. Now, assume that the Variable Costing Net Income is $1,035,000 for 2018. Prepare a Reconciliation Schedule to compute the Absorption Costing Net Income for the same year. DO NOT PREPARE AN ABSORPTION COSTING INCOME STATEMENT.
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter2: Basic Cost Management Concepts
Section: Chapter Questions
Problem 25E: Last year, Orsen Company produced 25,000 juicers and sold 26,500 juicers for 60 each. The actual...
Related questions
Topic Video
Question
APL, Inc. began operations on January 1, 2016. The company does not generally carry Work in
Process Inventories at the end of the year. Variable product costs per unit were the same for 2016,
2017 and 2018 and total $68 per unit. Total Fixed Overhead Costs are $600,000 per year. Variable
Selling and Administrative Costs are $9 for each unit sold. Fixed Selling and Administrative Costs are
$230,000 per year. The Selling Price is $450 per unit for all three years. Production and Sales
figures (in units) for three years are below.
2016
2017
2018
Production (units)
4,000 units
5,000 units
3,000 units
Sales (units)
2,000 units
2,500 units
5,000 units
The company uses the FIFO method to assign cost to any units left in ending Finished Goods
Inventory.
TASKS:
A.
Prepare, in good form (to include a proper heading), two Income Statements for 2017: One
using Absorption Costing and one using Variable Costing. Use the formats that I used in the
class example for Chapter 6. Then, prepare a Reconciliation to explain the difference in the
Net Income figures. Again, use the format that I used in the class example.
B.
Now, assume that the Variable Costing Net Income is $1,035,000 for 2018. Prepare a
Reconciliation Schedule to compute the Absorption Costing Net Income for the same year.
DO NOT PREPARE AN ABSORPTION COSTING INCOME STATEMENT.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 4 steps with 3 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
College Accounting, Chapters 1-27
Accounting
ISBN:
9781337794756
Author:
HEINTZ, James A.
Publisher:
Cengage Learning,
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
College Accounting, Chapters 1-27
Accounting
ISBN:
9781337794756
Author:
HEINTZ, James A.
Publisher:
Cengage Learning,
Principles of Cost Accounting
Accounting
ISBN:
9781305087408
Author:
Edward J. Vanderbeck, Maria R. Mitchell
Publisher:
Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
Financial And Managerial Accounting
Accounting
ISBN:
9781337902663
Author:
WARREN, Carl S.
Publisher:
Cengage Learning,