Donaldson Corporation is a manufacturer of computer accessories. It uses absorption costing based on standard costs and reports the following data for 2014:(Click the icon to view the data.)There are no price, spending, or efficiency variances. Actual operating costs equal budgeted operating costs. The production-volume variance is written off to cost of goods sold. For each choice of denominatorlevel, the budgeted production cost per unit is also the cost per unit of beginning inventory.- XData TableTheoretical capacityPractical capacityNormal capacity utilizationSelling priceBeginning inventoryProductionLess:PrintDifference in operating income$Sales volumeVariable budgeted manufacturing cost$Total budgeted fixed manufacturing costs$ 2,915,000Total budgeted operating (non-manuf.) costs (all fixed) $ 200,000Done275,000 units265,000 units233,200 units39 per unitLess:35,000 units235,000 units250,000 unitsRequirement 3. Why is the operating income under normal capacity utilization lower than the other two scenarios?During 2014 Donaldson hadin inventory levels. Theallocated to each unit of production, and, when those units arecapacity of the three, hence in this year, when production wassold, theNormal utilization capacity is thesales, the absorption-costing based operating income is the smallest when normal capacity utilization is used as the denominator level.Requirement 4. Reconcile the difference in operating income based on theoretical capacity and practical capacity with the difference in fixed manufacturing overhead included in inventory. (Abbreviation used:Mfg. = Manufacturing.)8 per unitance as favorable (F) or unfavorable (U).Multiply by:= Difference in fixed mfg overhead included in inventorythan

During 2014 Donaldson had a drop of 15,000 units in inventory levels. The smaller the denominator…

e icon to view the data.) price, spending, or efficiency variances. Actual operating costs equal budgeted operating costs. The production-volume vari dgeted production cost per unit is also the cost per unit of beginning inventory. - X ita Table etical capacity cal capacity al capacity utilization price ning inventory ction volume le budgeted manufacturing cost budgeted fixed manufacturing costs $ 275,000 units 265,000 units 233,200 units 39 per unit 35,000 units 235,000 units 250,000 units $ $ 2,915,000 8 per unit ance as favorable (F) or unfavorable (U).

e icon to view the data.) price, spending, or efficiency variances. Actual operating costs equal budgeted operating costs. The production-volume vari dgeted production cost per unit is also the cost per unit of beginning inventory. - X ita Table etical capacity cal capacity al capacity utilization price ning inventory ction volume le budgeted manufacturing cost budgeted fixed manufacturing costs $ 275,000 units 265,000 units 233,200 units 39 per unit 35,000 units 235,000 units 250,000 units $ $ 2,915,000 8 per unit ance as favorable (F) or unfavorable (U).

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter7: Variable Costing For Management analysis

Section: Chapter Questions

Problem 7E: The following data were adapted from a recent income statement of The Procter Gamble Company (PG):...

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Magic Me is a manufacturer of magic kits. It uses absorption costing based on standard costs and reports the following data for 2017: There are no price, spending, or efficiency variances. Actual operating costs equal budgeted operating costs. The production-volume variance is written off to cost of goods sold. For each choice of denominator level, the budgeted production cost per unit is also the cost per unit of beginning inventory Q. Reconcile the difference in operating income based on theoretical capacity and practical capacity with the difference in fixed manufacturing overhead included in inventory.
Magic Me is a manufacturer of magic kits. It uses absorption costing based on standard costs and reports the following data for 2017: There are no price, spending, or efficiency variances. Actual operating costs equal budgeted operating costs. The production-volume variance is written off to cost of goods sold. For each choice of denominator level, the budgeted production cost per unit is also the cost per unit of beginning inventory Q. Why is the operating income under normal capacity utilization lower than the other two scenarios?
Magic Me is a manufacturer of magic kits. It uses absorption costing based on standard costs and reports the following data for 2017: There are no price, spending, or efficiency variances. Actual operating costs equal budgeted operating costs. The production-volume variance is written off to cost of goods sold. For each choice of denominator level, the budgeted production cost per unit is also the cost per unit of beginning inventory Q. Prepare absorption costing–based income statements for Magic Me Corporation using theoretical capacity, practical capacity, and normal capacity utilization as the denominator levels.
The managerial accountant at Fast and Mean Manufacturing reported that the organization contains an automated production line to manufacture and produce its products for consumers to enjoy in the marketplace. The managerial accountant reported that the company uses the high-low method to estimate the costs in the new budget. The managerial accountant reported the following information: Compute the slope of the mixed cost, or the variable cost per unit of activity. Compute the vertical intercept, or the fixed cost component of the mixed cost. What is the mixed cost equation? Month Total machine hours total cost January 250,000 $5,500,000 February 248,000 $5,260,000 March 249,000 $5,400,000 April 248,000 $5,220,000 May 238,000 $5,180,000 June 230,000 $5,130,000
The May 2018 revenue and cost information for Boise Outfitters, Inc. follows: (Click the icon to view the revenue and cost information.) Prepare a standard cost income statement for management through gross profit. Report all standard cost variances for management's use. Has management done a good or poor job of controlling costs? Explain. (Use a minus sign or parentheses to enter any contra expenses. Enter all other amounts as positive numbers.) Boise Outfitters, Inc. - X Data table Standard Cost Income Statement For the Month Ended May 31, 2018 Sales Revenue (at standard) Cost of Goods Sold (at standard) Direct Materials Cost Variance Direct Materials Efficiency Variance Direct Labor Cost Variance Direct Labor Efficiency Variance Variable Overhead Cost Variance Variable Overhead Efficiency Variance Fixed Overhead Cost Variance Fixed Overhead Volume Variance Print Done Gross Profit $ 560,000 344,000 700 F 6,000 F 4,700 U 2,300 F 3,000 U 750 U 1,500 U 8,700 F
Find the values of the missing items. Assume that the actual sales volume equals actual production volume. (There are no inventory level changes.) (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.) Sales revenue Variable manufacturing costs Variable marketing and administrative costs Contribution margin Reported Income Statement (2,600 units) $ 132,600 $ 85,000 Manufacturing Variance $ 4,420 F Marketing and Administrative Variance Sales Price Variance Flexible Budget Sales Activity (2,600 Variance units) $ 143,000 1,520 F Master Budget (2,700 units) 16,200
A company that uses standard costing Group of answer choices a. shows the same per-unit cost of inventory each month. b. shows higher incomes than it would if it used actual costing. c. always has a volume variance unless normal capacity and practical capacity are the same. d. must make only one product.
Kertas, Inc. produces paper and office supplies and uses the just-in-time inventory system. Currently, the company is using variable costing. Which of the following is true of the effect of costing systems on the financial results of Kertas? A. Its operating income will vary a little if the company uses absorption costing instead of variable costing. B. Its operating income will be significantly higher if the company uses absorption costing instead of variable costing. C. Its operating income will be negative if the company uses absorption costing instead of variable costing. D. Its operating income will be significantly lower if the company uses absorption costing instead of variable costing.
The Alamo Company reports the actual data for 2023 and 2022. There are no price, efficiency or rate variances. Any production volume varlances are written off to Cost of Goods Sold in the year it occurs. Unit Data Beginning Inventory Production Budgeted Production Sales Variable costs Manufacturing cost per unit produced Operating (marketing) cost per unit sold Fixed costs Manufacturing costs Operating (marketing) costs Selling price per unit $ ss $ $ ss $ $ 2021 10 900 1,200 880 350 $ 40 $ 69,600 $ 8,400 $ 800 $ 2022 30 1,000 1,200 950 355 42 69,600 8,400 800 Required a. Prepare a statement of comprehensive income for each year using variable costing and absorption costing. b. Reconcile the difference between the operating incomes for each year; ensure to report the number of units for beginning and ending inventory for Fixed Manufacturing costs.
Find the values of the missing items (a) through (x). Assume the actual sales volume equals actual production volume. Marketing and Administrative Sales Price Variance Variance Units Sales Revenue Less: Variable Manufacturing Costs Variable marketing and administrative costs Contribution margin Fixed manufacturing costs Fixed marketing and administrative costs Operating Profit PreviousNext Reported income statement (based on actual sales volume) Manufacturing variance (a) (g) (n) (q) (r) (t) $4,320 $3,600 (0) $1,800 U $ 400 F (u) (p) (s) (v) (w) $3,600 F (X) $3,600 F Flexible Budget (based on actual sales volume (b) (h) (m) Sales Activity Variance 4,000 F (1) $19,200 (i) $4,800 $800 U $12,000 (k) $3,000 $4,000 (1) Master Budget (based on budgeted sales volume) 20,000 $30,000 (c) (d) (e) (f) $16,000 $10,000
The firm manufactures a product with the following costs: Direct materials→₱18.00; Direct labor→₱11.90; Variable manufacturing overhead→₱2.10; Fixed manufacturing overhead→₱1,422,000; Variable selling, general and administrative expenses→₱3.60; Fixed selling, general and administrative expenses→₱1,540,500. The company uses the absorption costing approach to cost-plus pricing. The pricing calculations are based on budgeted production and sales of 79,000 units per year. The company has invested ₱420,000 in this product and expects a return on investment of 15%. The selling price based on the absorption costing approach would be closest to: a. ₱108.04 b. ₱73.90 c. ₱47.29 d. ₱73.10
The firm manufactures a product with the following costs: Direct materials→₱14.00; Direct labor→₱12.00; Variable manufacturing overhead→₱3.00; Fixed manufacturing overhead→₱1,500,000; Variable selling, general and administrative expenses→₱2.00; Fixed selling, general and administrative expenses→₱1,000,000. The company uses the absorption costing approach to cost-plus pricing. The pricing calculations are based on budgeted production and sales of 80,000 units per year. The company has invested ₱500,000 in this product and expects a return on investment of 25%. Tax rate is 25%.