During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Year 1 Year 2 Sales (@ $62 per unit) $ 1,178,000 $1,798, 000 Cost of goods sold (@ $36 per unit) 684,000 1,044,000 Gross margin 494,000 754,000 Selling and administrative expenses * 305,000 335,000 Net operating income $ 189,000 $ 419,000 * $3 per unit variable; $248,000 fixed each year. The company's $36 unit product cost is computed as follows: Direct materials $ 9 Direct labor 10 Variable manufacturing overhead 4 Fixed manufacturing overhead ($312,000 - 24,000 units) 13 Absorption costing unit product cost $ 36 Production and cost data for the first two years of operations are: Year 1 Year 2 Units produced 24,000 24,000 Units sold 19,000 29,000 Required: Using variable costing, what is the unit product cost for both years? What is the variable costing net operating income in Year 1 and in Year 2? Reconcile the absorption costing and the variable costing net operating income figures for each year

During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Year 1 Year 2 Sales (@ $62 per unit) $ 1,178,000 $1,798, 000 Cost of goods sold (@ $36 per unit) 684,000 1,044,000 Gross margin 494,000 754,000 Selling and administrative expenses * 305,000 335,000 Net operating income $ 189,000 $ 419,000 * $3 per unit variable; $248,000 fixed each year. The company's $36 unit product cost is computed as follows: Direct materials $ 9 Direct labor 10 Variable manufacturing overhead 4 Fixed manufacturing overhead ($312,000 - 24,000 units) 13 Absorption costing unit product cost $ 36 Production and cost data for the first two years of operations are: Year 1 Year 2 Units produced 24,000 24,000 Units sold 19,000 29,000 Required: Using variable costing, what is the unit product cost for both years? What is the variable costing net operating income in Year 1 and in Year 2? Reconcile the absorption costing and the variable costing net operating income figures for each year

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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ed Dowell Company produces a single product. Its income statements under absorption costing for its first two years of operation follow. Income Statements (Absorption Costing) Sales ($60 per unit) Year 1 $ Year 2 $ 1,920,000 3,960,000 Cost of goods sold ($45 per unit) 1,440,000 2,970,000 Gross profit 480,000 990,000 Selling and administrative expenses ok Income t 338,000 474,000 $ 142,000 $ 516,000 Additional Information a. Sales and production data for these first two years follow. Year 1 Year 2 nces Units Units produced 49,000 49,000 Units sold 32,000 66,000 b. Variable costs per unit and fixed costs per year are unchanged during these years. The company's $45 per unit product cost using absorption costing consists of the following. Direct materials Direct labor $ 12 19 Variable overhead Fixed overhead ($539,000/49,000 units) 3 11 Total product cost per unit $ 45 c. Selling and administrative expenses consist of the following. Selling and Administrative Expenses Variable selling and…
Portmann Company, operating at full capacity, sold 1,000,000 units at a price of $186 per unit during the current year. Its income statement is as follows: Sales $186,000,000 Cost of goods sold (99,000,000) Gross profit $87,000,000 Expenses: Selling expenses $14,000,000 Administrative expenses 12,400,000 Total expenses (26,400,000) Operating income $60,600,000 The division of costs between variable and fixed is as follows: Variable Fixed Cost of goods sold 70% 30% Selling expenses 75% 25% Administrative expenses 50% 50% Management is considering a plant expansion program for the following year that will permit an increase of $11,160,000 in yearly sales. The expansion will increase fixed costs by $3,500,000 but will not affect the relationship between sales and variable costs. Required: 6. Determine the maximum operating income possible with the expanded plant.
Evans Company reported the following: Manufacturing costs Units manufactured Units sold Beginning inventory $2,385,000 53,000 40,000 units sold for $100 per unit O units What is the amount of gross profit margin? $2,915,000 $4,000,000 $1,615,000 $2,200,000
Assume a retailing company has two departments-Department A and Department B. The company's most recent contribution format income statement follows: Total Department A Department B $ 800,000 350,000 450,000 $ 350,000 250,000 Sales $ 450,000 Variable expenses Contribution margin 100,000 100,000 350,000 Fixed expenses 400,000 140,000 260,000 Net operating income (loss) $ 50,000 $ (40,000) $ 90,000 The company says that $60,000 of the fixed expenses being charged to Department A are sunk costs or allocated costs that will continue if the segment is discontinued. However, if Department A is discontinued the sales in Department B will drop by 18%. What is the financial advantage (disadvantage) of discontinuing Department A? Multiple Choice $(103,000) $(83,000) $(92,000) $(101,000)
Darby Company, operating at full capacity, sold 124,200 units at a price of $84 per unit during the current year. Its income statement is as follows: Sales $10,432,800 Cost of goods sold 3,696,000 Gross profit $6,736,800 Expenses: Selling expenses $1,848,000 Administrative expenses 1,120,000 Total expenses 2,968,000 Income from operations $3,768,800 The division of costs between variable and fixed is as follows: Variable Fixed Cost of goods sold 60% 40% Selling expenses 50% 50% Administrative expenses 30% 70% Management is considering a plant expansion program for the following year that will permit an increase of $924,000 in yearly sales. The expansion will increase fixed costs by $123,200, but will not affect the relationship between sales and variable costs. 1. Determine the total variable costs and the total fixed costs for the current year. Total variable costs $fill in the blank 1 Total fixed…
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Darby Company, operating at full capacity, sold 122,200 units at a price of $102 per unit during the current year. Its income statement is as follows: Sales $12,464,400 Cost of goods sold 4,420,000 Gross profit $8,044,400 Expenses: Selling expenses $2,210,000 Administrative expenses 1,326,000 Total expenses 3,536,000 Income from operations $4,508,400 The division of costs between variable and fixed is as follows: Variable Fixed Cost of goods sold 60% 40% Selling expenses 50% 50% Administrative expenses 30% 70% Management is considering a plant expansion program for the following year that will permit an increase of $1,122,000 in yearly sales. The expansion will increase fixed costs by $149,600, but will not affect the relationship between sales and variable costs.
Shown here is an income statement in the traditional format for a firm with a sales volume of 17,500 units: Revenues $ 175,500 Cost of goods sold ($11,500 + $2.95/unit) 69,025 Gross profit $ 106,475 Operating expenses: Selling ($2,000 + $1.20/unit) 25,400 Administration ($5,250 + $0.45/unit) 14,025 Operating income $ 67,050 Required: a. Prepare an income statement in the contribution margin format. Contribution Margin Income Statement Variable expenses: Total variable expenses 0 0 Fixed expenses: Total fixed expenses 0 $0 b. Calculate the contribution margin per unit and the contribution margin ratio. (Do not round intermediate calculations. Round your answers to 2 decimal places.) c|. Calculate the firm's operating income (or loss) if the volume changed from 19,500 units to 1. 24,500 units. 2. 11,500 units. d. Refer to your answer to part a when total revenues were $175,500. Calculate the firm's operating income (or loss) if unit selling price and variable expense…
Westerville Company reported the following results from last year’s operations: Sales $ 1,800,000 Variable expenses 740,000 Contribution margin 1,060,000 Fixed expenses 700,000 Net operating income $ 360,000 Average operating assets $ 1,200,000 At the beginning of this year, the company has a $400,000 investment opportunity with the following cost and revenue characteristics: Sales $ 600,000 Contribution margin ratio 60 % of sales Fixed expenses $ 288,000 The company’s minimum required rate of return is 10%. 6. What is the ROI related to this year’s investment opportunity? (Do not round intermediate calculations.) 7. If the company pursues the investment opportunity and otherwise performs the same as last year, what margin will it earn this year? (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).) 8. If the company pursues the investment opportunity and otherwise performs the same as last year,…
During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: sales (@$64 per unit) Cost of goods sold (@ $39 per unit) Gross margin selling and administrative expenses* Net operating income *$3 per unit variable; $252,000 fixed each year. The company's $39 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($400,000 25,000 units) Absorption costing unit product cost Production and cost data for the first two years of operations are: Units produced Units sold Year 1 25,000 20,000 Year 2 25,000 30,000 Complete this question by entering your answers in the tabs below. Required 1 Required 2 Using variable costing, what is the unit product cost for both years? Unit product cost Required 3 Required: 1. Using variable costing, what is the unit product cost for both years? 2. What is the variable costing net operating Income In Year 1 and In Year 2? 3.…
Divisions A and B of Denner Company reported the following results for October: Division A Division B Sales $90,000 $150,000 Variable Expenses as a Percentage of Sales 70% 60% Segment Margin $2,000 $23,000 If common fixed expenses were $31,000, what were the total fixed expenses?