The board of directors of Oriole Corporation is considering whether or not it should instruct the accounting department to shift from a first-in, first-out (FIFO) basis of pricing inventories to a last-in, first-out (LIFO) basis. The following information is available. Sales Inventory, January 1 Purchases Inventory, December 31 Operating expenses 21,200 units @ 6,200 units @ 6,400 units @ 10,300 units @ 7,600 units @ 9,300 units @ $60 24 26 30 36 ? $240,000 Prepare a condensed income statement for the year on both bases for comparative purposes.

The board of directors of Oriole Corporation is considering whether or not it should instruct the accounting department to shift from a first-in, first-out (FIFO) basis of pricing inventories to a last-in, first-out (LIFO) basis. The following information is available. Sales Inventory, January 1 Purchases Inventory, December 31 Operating expenses 21,200 units @ 6,200 units @ 6,400 units @ 10,300 units @ 7,600 units @ 9,300 units @ $60 24 26 30 36 ? $240,000 Prepare a condensed income statement for the year on both bases for comparative purposes.

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 3CMA

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Use the following information for Exercises 2-47 through 2-49. Jasper Company provided the following information for last year: Last year, beginning and ending inventories of work in process and finished goods equaled zero. Exercise 2-49 Income Statement Refer to the information for Jasper Company on the previous page. Required: 1. Prepare an income statement for Jasper for last year. Calculate the percentage of sales for each line item on the income statement. (Note: Round percentages to the nearest tenth of a percent.) 2. CONCEPTUAL CONNECTION Briefly explain how a manager could use the income statement created for Requirement 1 to better control costs.
Pattison Products, Inc., began operations in October and manufactured 40,000 units during the month with the following unit costs: Fixed overhead per unit = 280,000/40,000 units produced = 7. Total fixed factory overhead is 280,000 per month. During October, 38,400 units were sold at a price of 24, and fixed marketing and administrative expenses were 130,500. Required: 1. Calculate the cost of each unit using absorption costing. 2. How many units remain in ending inventory? What is the cost of ending inventory using absorption costing? 3. Prepare an absorption-costing income statement for Pattison Products, Inc., for the month of October. 4. What if November production was 40,000 units, costs were stable, and sales were 41,000 units? What is the cost of ending inventory? What is operating income for November?
Classify each of the following actions as either being associated with the financial accounting information system (FS) or the cost management information system (CMS): a. Determining the total compensation of the CEO of a public company b. Issuing a quarterly earnings report c. Determining the unit product cost using TDABC d. Calculating the number of units that must be sold to break even e. Preparing a required report for the SEC f. Preparing a sales budget g. Using cost and revenue information to decide whether to keep, or drop, a product line h. Preparing an annual statement of financial position that conforms to generally accepted accounting principles (GAAP) i. Using cost and revenue information to decide whether to invest in a new production system or not j. Reducing costs by improving the overall quality of a product k. Using a debt-equity ratio and liquidity ratios from a balance sheet to assess the likelihood of bankruptcy l. Using a public companys financial statements to decide whether or not to buy its stock
Using the information in the previous exercises about Marleys Manufacturing, determine the operating income for department B, assuming department A sold department B 1,000 units during the month and department A reduces the selling price to the market price.
Bradshaw Company reported sales of 5,000,000 in 20X1. At the end of the fiscal year (June 30, 20X1), the following quality costs were reported: Required: 1. Prepare a quality cost report. 2. Prepare a graph (pie chart or bar graph) that shows the relative distribution of quality costs, and comment on the distribution. 3. Assuming sales of 5,000,000, by how much would profits increase if quality improves so that quality costs are only 3% of sales?
Ellerson Company provided the following information for the last calendar year: During the year, direct materials purchases amounted to 278,000, direct labor cost was 189,000, and overhead cost was 523,000. During the year, 100,000 units were completed. Refer to Exercise 2.21. Last calendar year, Ellerson recognized revenue of 1,312,000 and had selling and administrative expenses of 204,600. Required: 1. What is the cost of goods sold for last year? 2. Prepare an income statement for Ellerson for last year.
The following data were adapted from a recent income statement of Caterpillar Inc. (CAT) for the year ended December 31: Assume that 8,500 million of cost of goods sold and 4,000 million of selling, administrative, and other expenses were fixed costs. Inventories at the beginning and end of the year were as follows: Also, assume that 30% of the beginning and ending inventories were fixed costs. a. Prepare an income statement according to the variable costing concept for Caterpillar Inc. Round numbers to nearest million. b. Explain the difference between the amount of operating income reported under the absorption costing and variable costing concepts. Round numbers to nearest million.
Golden Eagle Company began operations on April 1 by selling a single product. Data on purchases and sales for the year are as follows: Purchases: Sales: The president of the company, Connie Kilmer, has asked for your advice on which inventory cost flow method should be used for the 32,000-unit physical inventory that was taken on December 31. The company plans to expand its product line in the future and uses the periodic inventory system. Write a brief memo to Ms. Kilmer comparing and contrasting the LIFO and FIFO inventory cost flow methods and their potential impacts on the companys financial statements.
A company uses charging rates to allocate service department costs to the using departments. The accountant compiled the following information on one of the service departments: If Department K plans to use 1,350 hours of the service departments service in the coming year, how much of the service departments cost is allocated to Department K? a. 3,375 b. 27,300 c. 26,325 d. 23,950
Renfro, Inc. was franchised on January 1, 2016. At the end of its third year of operations, December 31, 2018, management requested a study to determine what effect different materials inventory costing methods would have had on its reported net income over the three-year period. The materials inventory account, using LIFO, FIFO, and weighted average, would have had the following ending balances: a. Assuming the same number of units in ending inventory at the end of each year, were material costs rising or falling from 2016 to 2018? b. Which costing method would show the highest net income for 2017? c. Which method would show the lowest net income for 2018? d. Which method would show the highest net income for the three years combined?
Chassen Company, a cracker and cookie manufacturer, has the following unit costs for the month of June: A total of 100,000 units were manufactured during June, of which 10,000 remain in ending inventory. Chassen uses the first-in, first-out (FIFO) inventory method, and the 10,000 units are the only finished goods inventory at June 30. Under the absorption costing concept, the value of Chassens June 30 finished goods inventory would be: a. 50,000. b. 70,000. c. 85,000. d. 145,000.
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 Refer to the information in 2.24. The gross margin percentage for last year was a. 12.57% b. 55.67% c. 28.95% d. 38.33%