Fairfax Inc. manufactures a small part that is widely used in various electronic products. Operating results for the first three years of operation are as 10nows: Year 1 Sales Year 2 672,000 Year 3 800,000 CGS 600.000 504.000 Gross margin 200,000 168,000 Selling and admin. Expenses 200.000 184.000 Net operating income (loss) 0 (16,000) Production and sales data for the three year period were as follows: Year 1 Year 2 Year 3 Production units Sales units 50,000 50,000 45,000 50,000 42,000 50,000 Additional information: 1. The company plant is highly automated. Variable manufacturing costs total $3 per unit. The annual fixed manufacturing overhead is $450,000. 2. Variable selling and administrative expenses were 52 per unit sold. Annual fixed selling and administrative expenses totaled $100,000 annually. 3. The above costs stayed constant across the three years and the company uses a LIFO inventory flow assumption. Required: 1. Complete the traditional income statement above for year 3, 2. Complete the following NOI Reconcile table (show full details of how you calculated the deferred and released amounts for any credit). Year 1 Year 2 Year 3 Reconciliation report Variable costing NOI FO deferred in Inventory FO released from Inventory Absorption costing NOI 0 (16,000)
Fairfax Inc. manufactures a small part that is widely used in various electronic products. Operating results for the first three years of operation are as 10nows: Year 1 Sales Year 2 672,000 Year 3 800,000 CGS 600.000 504.000 Gross margin 200,000 168,000 Selling and admin. Expenses 200.000 184.000 Net operating income (loss) 0 (16,000) Production and sales data for the three year period were as follows: Year 1 Year 2 Year 3 Production units Sales units 50,000 50,000 45,000 50,000 42,000 50,000 Additional information: 1. The company plant is highly automated. Variable manufacturing costs total $3 per unit. The annual fixed manufacturing overhead is $450,000. 2. Variable selling and administrative expenses were 52 per unit sold. Annual fixed selling and administrative expenses totaled $100,000 annually. 3. The above costs stayed constant across the three years and the company uses a LIFO inventory flow assumption. Required: 1. Complete the traditional income statement above for year 3, 2. Complete the following NOI Reconcile table (show full details of how you calculated the deferred and released amounts for any credit). Year 1 Year 2 Year 3 Reconciliation report Variable costing NOI FO deferred in Inventory FO released from Inventory Absorption costing NOI 0 (16,000)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Fairfax Inc. manufactures a small part that is widely used in various electronic products. Operating results for the first three years of operation are asoows:
Year 1
Year 2
Year 3
Sales
800,000
672,000
CGS
600.000
504.000
Gross margin
200,000
168,000
Selling and admin. Expenses
200.000
184.000
Net operating income (loss)
0
(16,000)
Production and sales data for the three year period were as follows:
Year 1
Year 2
Year 3
50,000
50,000
45,000
Production units
Sales units
50,000
42,000
50,000
Additional information:
1. The company plant is highly automated. Variable manufacturing costs total $3 per unit. The annual fixed manufacturing overhead is $450,000.
2. Variable selling and administrative expenses were 52 per unit sold. Annual fixed selling and administrative expenses totaled $100,000 annually.
3. The above costs stayed constant across the three years and the company uses a LIFO inventory flow assumption.
Required:
1. Complete the traditional income statement above for year 3.
2. Complete the following NOI Reconcile table (show full details of how you calculated the deferred and released amounts for any credit).
Year 1
Year 2
Year 3
Reconciliation report
Variable costing NOI
FO deferred in Inventory
FO released from Inventory
Absorption costing NOI
0
(16,000)
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