Use the following information for the questions below. Frank Company produces sporting equipment. In 2021, the first year of operations, Frank produced 24,000 units and sold 19,000 units. In 2022, the production and sales results were exactly reversed. In each year, selling price was $100, variable manufacturing costs were $40 per unit, variable selling expenses were $8 per unit, fixed manufacturing costs were $540,000, and fixed administrative expenses were $200,000. Instructions a)Prepare an income statement for 2021 using variable costing. costing. b)Prepare an income statement for 2021 using absorptic c)Reconcile the differences each year in income from operations under the two costing approaches.

Use the following information for the questions below. Frank Company produces sporting equipment. In 2021, the first year of operations, Frank produced 24,000 units and sold 19,000 units. In 2022, the production and sales results were exactly reversed. In each year, selling price was $100, variable manufacturing costs were $40 per unit, variable selling expenses were $8 per unit, fixed manufacturing costs were $540,000, and fixed administrative expenses were $200,000. Instructions a)Prepare an income statement for 2021 using variable costing. costing. b)Prepare an income statement for 2021 using absorptic c)Reconcile the differences each year in income from operations under the two costing approaches.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter2: Basic Cost Management Concepts

Section: Chapter Questions

Problem 4CE: Refer to Cornerstone Exercises 2.2 and 2.3. Next year, Pietro expects to produce 50,000 units and...

See similar textbooks

Similar questions

Refer to Cornerstone Exercises 2.2 and 2.3. Next year, Pietro expects to produce 50,000 units and sell 49,300 units at a price of 12.50 each. Beginning inventory of finished goods is 42,500, and ending inventory of finished goods is expected to be 34,000. Total selling expense is projected at 26,000, and total administrative expense is projected at 134,000. Required: 1. Prepare an income statement in good form. Be sure to include the percent of sales column. 2. What if the cost of goods sold percentage for the past few years was 65 percent? Explain how management might react.
A company is spending 70,000 per year for inspecting, 60,000 per year for purchasing, and 56,000 per year for reworking products. What is a good estimate of non-value-added costs? a. 126,000 b. 70,000 c. 56,000 d. 130,000
The cost data for Evencoat Paint for the year 2019 is as follows: Using the high-low method, express the companys maintenance costs as an equation where x represents the gallons of paint produced. Then estimate the fixed and variable costs. Predict the maintenance costs i190,000 gallons of paint are produced. Predict the maintenance costs if 81,000 gallons of paint are produced. Using Excel, create a scatter graph of the cost data and explain the relationship between gallons of paint produced and equipment maintenance expenses.
Suppose that a company is spending 60,000 per year for inspecting, 30,000 for purchasing, and 40,000 for reworking products. A good estimate of nonvalue-added costs would be a. 70,000. b. 130,000. c. 40,000. d. 90,000. e. 100,000.
Poleski Manufacturing, which maintains the same level of inventory at the end of each year, provided the following information about expenses anticipated for next year: The selling price of Poleskis single product is 16. In recent years, profits have fallen and Poleskis management is now considering a number of alternatives. Poleski wants to have a net income next year of 250,000, but expects to sell only 120,000 units unless some changes are made. The president of Poleski has asked you to calculate the companys projected net income (assuming 120,000 units are sold) and the sales needed to achieve the companys net income objective for next year. Also, compute Poleskis contribution margin per unit, contribution margin ratio, and break-even point for next year. The worksheet CVP has been provided to assist you. Note that the data from the problem have already been entered into the Data Section of the worksheet.
Cute Sdn. Bhd. produces sporting equipment. In 2019, the first year of operations, Cute Sdn. Bhd. produced 25,000 units and sold 22,000 units. In 2020, the production and sales results were exactly reversed. In each year, selling price was RM100, variable manufacturing costs were RM40 per unit, variable selling expenses were RM8 per unit, fixed manufacturing costs were RM550,000, and fixed administrative expenses were RM200,000. Compute the net income under absorption costing for each year.
Stanczyk Inc. started operations in January 2025. The company produces and sells cabinets for $5,200 each. The following information pertains to the cost and sales of the cabinets each year: Variable manufacturing costs $2,300 per unit Variable operating costs $65 per unit Fixed manufacturing costs $25,000 Fixed operating costs $12,000 The company produced 25 units per year for 2025, 2026, and 2027. The company sold 22 units in 2025, 20 units in 2026, and 26 units in 2027. It reported no volume variances for the three-year period. For 2025, Question options: a) the operating income for absorption costing may be greater than, equal to or less than operating income under variable costing. b) the operating income for absorption costing equaled operating income for variable costing. c) variable costing operating income exceeded absorption costing operating income by $3,000.…
Riyadh computers planned and actually manufactured 200,000 units of its single product in 2020, its first year of operation. Variable manufacturing cost was $20 per unit produced. Variable operating (nonmanufacturing) cost was $10 per unit sold. Planned and actual fixed manufacturing costs were $600,000. Planned and actual fixed operating (nonmanufacturing) costs totaled $400,000. Riyadh computers sold 120,000 units of product at $40 per unit. Required: prepare income statement and calculate 1. Riyadh computers operating income using absorption costing for the year 2020(5 Points) 2. Riyadh computers operating income using variable costing for the year 2020. (5 Points) Note: Show supporting calculations.
Telematics Incorporated manufactures flat-screen television sets. The company’s contribution format income statement for 2021 is given below: Total Per Unit Percentage of Sales Sales (25,000 units) $ 2,500,000 $ 100 100% Less variable expenses $ 1,500,000 $ 60 ? % Contribution Margin $ 1,000,000 $ 40 ? % Less Fixed Expenses $ 800,000 Operating Income $ 200,000 Management believes operating income can be further improved and would like you to prepare the following analysis: Required: Refer to the original data. Assume that next year, management wants the company to earn a minimum profit of $ 500,000. How many units will have to sold to meet this target profit figure? Refer to the original data. Compute the company’s margin of safety in both dollar and percentage form. Assume that, through a more intense effort by the sales staff, the company’s sales increase by 12 %. By what percentage would you expect…
Sims Company, a manufacturer of tablet computers, began operations on January 1, 2019. Its cost and sales information for this year follows. Manufacturing costs Direct materials $ 30 per unit Direct labor $ 50 per unit Overhead costs Variable $ 20 per unit Fixed $ 8,400,000 (per year) Selling and administrative costs for the year Variable $ 750,000 Fixed $ 4,000,000 Production and sales for the year Units produced 105,000 units Units sold 75,000 units Sales price per unit $ 350 per unit 1. Prepare an income statement for the year using variable costing.2. Prepare an income statement for the year using absorption costing.
Darius Manufacturing Company manufactures and sells parts for various musical gadgets. The businessearned Operating Income of $420,000 in 2018, when selling price per unit was $200 and the president ofDarius is under pressure to increase operating income in 2019 and is therefore considering the implementationof strategies geared at increasing revenues. Data for variable cost per unit and total fixed costs were asfollows:Variable expenses per unit: Direct Material $20 ,Direct Labour $50, Variable Manufacturing Overhead $10Fixed expenses: Fixed Manufacturing Overhead $125,000, Fixed Selling Costs $75,000, Fixed Administrative Costs $100,000 You have just begun your internship at the company. The financial controller, Dave Miller, has indicated thatthe business is considering paying a commission to its sales team as part of the sales expansion effort, whichshould result in an increase in sales revenue. The head of the marketing department has indicated that theeffort of the sales team…
Darius Manufacturing Company manufactures and sells parts for various musical gadgets. The businessearned Operating Income of $420,000 in 2018, when selling price per unit was $200 and the president ofDarius is under pressure to increase operating income in 2019 and is therefore considering the implementationof strategies geared at increasing revenues. Data for variable cost per unit and total fixed costs were asfollows: Variable expenses per unit: Direct Material $20Direct Labour $50Variable Manufacturing Overhead $10Fixed expenses: Fixed Manufacturing Overhead $125,000Fixed Selling Costs $75,000Fixed Administrative Costs $100,000 You have just begun your internship at the company. The financial controller, Dave Miller, has indicated thatthe business is considering paying a commission to its sales team as part of the sales expansion effort, whichshould result in an increase in sales revenue. The head of the marketing department has indicated that theeffort of the sales team should…