Great Outdoze Company manufactures sleeping bags, which sell for $66.10 each. The variable costs of production are as follows:Direct materialDirect laborVariable manufacturing overhead$19.1010.307.40kBudgeted fixed overhead in 20x1 was $157,500 and budgeted production was 25,000 sleeping bags. The year's actual productionwas 25,000 units, of which 21,300 were sold. Variable selling and administrative costs were $1.30 per unit sold; fixed selling andadministrative costs were $22,000.at 2-a. Prepare an operating income statement for the year using absorption costing.2-b. Prepare an operating income statement for the year using variable costing.3. Reconcile reported operating income under the two methods using the shortcut method.Complete this question by entering your answers in the tabs below.

Absorption costing is a mechanism for aggregating and allocating expenses associated with a…

Answered: Great Outdoze Company manufactures…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter6: Activity-based, Variable, And Absorption Costing

Section: Chapter Questions

Problem 14EA: Cool Pool has these costs associated with production of 20,000 units of accessory products: direct...

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Moleno Company produces a single product and uses a standard cost system. The normal production volume is 120,000 units; each unit requires 5 direct labor hours at standard. Overhead is applied on the basis of direct labor hours. The budgeted overhead for the coming year is as follows: At normal volume. During the year, Moleno produced 118,600 units, worked 592,300 direct labor hours, and incurred actual fixed overhead costs of 2,150,400 and actual variable overhead costs of 1,422,800. Required: 1. Calculate the standard fixed overhead rate and the standard variable overhead rate. 2. Compute the applied fixed overhead and the applied variable overhead. What is the total fixed overhead variance? Total variable overhead variance? 3. CONCEPTUAL CONNECTION Break down the total fixed overhead variance into a spending variance and a volume variance. Discuss the significance of each. 4. CONCEPTUAL CONNECTION Compute the variable overhead spending and efficiency variances. Discuss the significance of each.
Gent Designs requires three units of part A for every unit of Al that it produces. Currently, part A is made by Gent, with these per-unit costs in a month when 4.000 units were produced: Variable manufacturing overhead is applied at $1.00 per unit. The other $0.30 of overhead consists of allocated fixed costs. Gent will need 6,000 units of part A for the next years production. Cory Corporation has offered to supply 6,000 units of part A at a price of $7.00 per unit. It Gent accepts the offer, all of the variable costs and $1,200 of the fixed costs will be avoided. Should Gent Designs accept the offer from Cory Corporation?
Remarkable Enterprises requires four units of part A for every unit of Al that it produces. Currently, part A is made by Remarkable, with these per-unit costs in a month when 4,000 units were produced: Variable manufacturing overhead is applied at $1.60 per unit. The other $0.50 of overhead consists of allocated fixed costs. Remarkable will need 8,000 units of part A for the next years production. Altoona Corporation has offered to supply 8,000 units of part A at a price of $8.00 per unit. If Remarkable accepts the offer, all of the variable costs and $2,000 of the fixed costs will be avoided. Should Remarkable accept the offer from Altoona Corporation?
Flaherty, Inc., has just completed its first year of operations. The unit costs on a normal costing basis are as follows: During the year, the company had the following activity: Actual fixed overhead was 12,000 less than budgeted fixed overhead. Budgeted variable overhead was 5,000 less than the actual variable overhead. The company used an expected actual activity level of 12,000 direct labor hours to compute the predetermined overhead rates. Any overhead variances are closed to Cost of Goods Sold. Required: 1. Compute the unit cost using (a) absorption costing and (b) variable costing. 2. Prepare an absorption-costing income statement. 3. Prepare a variable-costing income statement. 4. Reconcile the difference between the two income statements.
April Industries employs a standard costing system in the manufacturing of its sole product, a park bench. They purchased 60,000 feet of raw material for $300,000, and it takes S feet of raw materials to produce one park bench. In August, the company produced 10,000 park benches. The standard cost for material output was $100,000, and there was an unfavorable direct materials quantity variance of $6,000. A. What is April Industries standard price for one unit of material? B. What was the total number of units of material used to produce the August output? C. What was the direct materials price variance for August?
Fitzgerald Company manufactures sewing machines, and they produced 2,500 this past month. The standard variable manufacturing overhead (M0H) rate used by the company is $6.75 per machine hour. Each sewing machine requires 13.5 machine hours. Actual machine hours used last month were 33,500, and the actual variable MOH rate last month was $7.00. Calculate the variable overhead rate variance and the variable overhead efficiency variance.
Last year, Orsen Company produced 25,000 juicers and sold 26,500 juicers for 60 each. The actual variable unit cost is as follows: Fixed overhead was 320,000. Fixed selling expenses consisted of advertising copayments totaling 110,000. Fixed administrative expenses were 236,000. There were no beginning and ending work-in-process inventories. Beginning finished goods inventory was 148,000 for 4,000 juicers. The value of ending inventory reported on the financial statements was a. 55,500 b. 92,500 c. 66,500 d. 39,900
JoyT Company manufactures Maxi Dolls for sale in toy stores. In planning for this year, JoyT estimated variable factory overhead of 600,000 and fixed factory overhead of 400,000. JoyT uses a standard costing system, and factory overhead is allocated to units produced using standard direct labor hours. The level of activity budgeted for this year was 10,000 direct labor hours, and JoyT used 10,300 actual direct labor hours. Based on the output accomplished during this year, 9,900 standard direct labor hours should have been used. Actual variable factory overhead was 596,000, and actual fixed factory overhead was 410,000 for the year. Based on this information, the variable factory overhead controllable variance for JoyT for this year was: a. 24,000 unfavorable. b. 2,000 unfavorable. c. 4,000 favorable. d. 22,000 favorable.
Queen Industries uses a standard costing system in the manufacturing of its single product. It requires 2 hours of labor to produce 1 unit of final product. In February, Queen Industries produced 12,000 units. The standard cost for labor allowed for the output was $90,000, and there was an unfavorable direct labor time variance of $5,520. A. What was the standard cost per hour? B. How many actual hours were worked? C. If the workers were paid $3.90 per hour, what was the direct labor rate variance?
Hatch Manufacturing produces multiple machine parts. The theoretical cycle time for one of its products is 65 minutes per unit. The budgeted conversion costs for the manufacturing cell dedicated to the product are 12,960,000 per year. The total labor minutes available are 1,440,000. During the year, the cell was able to produce 0.6 units of the product per hour. Suppose also that production incentives exist to minimize unit product costs. Required: 1. Compute the theoretical conversion cost per unit. 2. Compute the applied conversion cost per minute (the amount of conversion cost actually assigned to the product). 3. Discuss how this approach to assigning conversion cost can improve delivery time performance. Explain how conversion cost acts as a performance driver for on-time deliveries.
Jillian Manufacturing Inc. manufactures a single product and uses a standard cost system. The factory overhead is applied on the basis of direct labor hours. A condensed version of the company’s flexible budget follows: The product requires 3 lb of materials at a standard cost of $5 per pound and 2 hours of direct labor at a standard cost of $10 per hour. For the current year, the company planned to operate at the level of 6,250 direct labor hours and to produce 3,125 units of product. Actual production and costs for the year follow: Required: For the current year, compute the factory overhead rate that will be used for production. Show the variable and fixed components that make up the total predetermined rate to be used. Prepare a standard cost card for the product. Show the individual elements of the overhead rate as well as the total rate. Compute (a) standard hours allowed for production and (b) under- or overapplied factory overhead for the year. Determine the reason for any under- or overapplied factory overhead for the year by computing all variances, using each of the following methods: Two-variance method Three-variance method (appendix) Four-variance method (appendix)
Box Springs, Inc., makes two sizes of box springs: twin and double. The direct material for the twin is $25 per unit and $40 s used in direct labor, while the direct material for the double is $40 per unit, and the labor cost is $50 per unit. Box Springs estimates it will make 5,000 twins and 9,000 doubles in the next year. It estimates the overhead for each cost pool and cost driver activities as follows: How much does each unit cost to manufacture?

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