Financial & Managerial Accounting
13th Edition
ISBN: 9781285866307
Author: Carl Warren, James M. Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Chapter 20, Problem 20.10EX
Variable and absorption costing—three products
Happy Feet Inc. manufactures and sells three types of shoes. The income statements prepared under the-absorption costing method for the three shoes are-as follows:
Happy Feet Inc.
Product Income Statements—Absorption Costing For the Year Ended December 31, 2016
| Cross Training Shoes |
Golf Shoes | Running Shoes |
|
| Revenues | $800,000 | $690,000 | $625,000 |
| Cost of goods sold | 416,000 | 338,100 | 418,750 |
| Gross profit | $384,000 | $351,900 | $206,250 |
| Selling and administrative expenses | 336,000 | 248,400 | 350,000 |
| Income from operations | $48,000 | $103,500 | $(143,750) |
In addition, you have determined the following information with respect to allocated fixed costs:
| Cross Training Shoes | Golf Shoes | Running Shoes | |
| Fixed costs: | |||
| Cost of goods sold | $128,000 | $ 9,700 | $ 118,750 |
| Selling and administrative expenses | 96,000 | 82.800 | 118,750 |
These fixed costs are used to support all three product lines. In addition, you have determined that the inventory is negligible.
The management of the company has deemed the profit performance of the running shoe line as unacceptable. As a result, it has decided to eliminate the running shoe line. Management does not expect to be able to increase sales in the other two lines. However, as a result of eliminating the running shoe line, management expects the- profits of the company to increase by $143,750.
- a. Do you agree with management’s decision and conclusions?
- b. Prepare a variable costing income statement for the three products.
- c. Use the report in (b) to determine the profit impact of eliminating the running shoe line, assuming no other changes.
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Variable and Absorption Costing—Three Products
Winslow Inc. manufactures and sells three types of shoes. The income statements prepared under the absorption costing method for the three shoes are as follows:
Winslow Inc.Product Income Statements—Absorption CostingFor the Year Ended December 31, 20Y1
Cross Training Shoes
Golf Shoes
Running Shoes
Revenues
$5,800,000
$6,900,000
$4,200,000
Cost of goods sold
(3,016,000)
(3,381,000)
(2,814,000)
Gross profit
$2,784,000
$3,519,000
$1,386,000
Selling and administrative expenses
(2,436,000)
(2,484,000)
(2,142,000)
Operating income
$348,000
$1,035,000
$(756,000)
In addition, you have determined the following information with respect to allocated fixed costs:
Cross Training Shoes
Golf Shoes
Running Shoes
Fixed costs:
Cost of goods sold
$928,000
$897,000
$798,000
Selling and administrative expenses
696,000
828,000
588,000
These fixed costs are used to support…
Variable and Absorption Costing—Three Products
Winslow Inc. manufactures and sells three types of shoes. The income statements prepared under the absorption costing method for the three shoes are as follows:
Winslow Inc.Product Income Statements—Absorption CostingFor the Year Ended December 31, 20Y1
Cross Training Shoes
Golf Shoes
Running Shoes
Revenues
$5,800,000
$6,900,000
$4,200,000
Cost of goods sold
(3,016,000)
(3,381,000)
(2,814,000)
Gross profit
$2,784,000
$3,519,000
$1,386,000
Selling and administrative expenses
(2,436,000)
(2,484,000)
(2,142,000)
Operating income
$348,000
$1,035,000
$(756,000)
In addition, you have determined the following information with respect to allocated fixed costs:
Cross Training Shoes
Golf Shoes
Running Shoes
Fixed costs:
Cost of goods sold
$928,000
$897,000
$798,000
Selling and administrative expenses
696,000
828,000
588,000
These fixed costs are used to support…
Variable and Absorption Costing—Three Products
Winslow Inc. manufactures and sells three types of shoes. The income statements prepared under the absorption costing method for the three shoes are as follows:
Winslow Inc.Product Income Statements—Absorption CostingFor the Year Ended December 31, 20Y1
Cross Training Shoes
Golf Shoes
Running Shoes
Revenues
$411,900
$238,900
$198,300
Cost of goods sold
(214,200)
(117,100)
(132,900)
Gross profit
$197,700
$121,800
$65,400
Selling and administrative expenses
(170,000)
(87,700)
(109,200)
Operating income
$27,700
$34,100
$(43,800)
In addition, you have determined the following information with respect to allocated fixed costs:
Cross Training Shoes
Golf Shoes
Running Shoes
Fixed costs:
Cost of goods sold
$65,900
$31,100
$27,800
Selling and administrative expenses
49,400
28,700
27,800
These fixed costs are used to support all three product lines and will not…
Chapter 20 Solutions
Financial & Managerial Accounting
Ch. 20 - What types of costs are customarily included in...Ch. 20 - Which type of manufacturing cost (direct...Ch. 20 - Which of the following costs would be included in...Ch. 20 - In the variable costing income statement, how are...Ch. 20 - Since all costs of operating a business are...Ch. 20 - Discuss how financial data prepared on the basis...Ch. 20 - Why might management analyze product...Ch. 20 - Explain why rewarding sales personnel on the basis...Ch. 20 - Discuss the two factors affecting both sales and...Ch. 20 - How is the quantity factor for an increase or a...
Ch. 20 - Explain why service companies use different...Ch. 20 - Prob. 20.1APECh. 20 - Variable costing Marley Company has the following...Ch. 20 - Variable costingproduction exceeds sales Fixed...Ch. 20 - Variable costingproduction exceeds sales Fixed...Ch. 20 - Variable costingsales exceed production The...Ch. 20 - Variable costing sales exceed production The...Ch. 20 - Analyzing income under absorption and variable...Ch. 20 - Analyzing income under absorption and variable...Ch. 20 - Contribution margin by segment The following...Ch. 20 - Contribution margin by segment The following...Ch. 20 - Contribution margin analysis The actual price for...Ch. 20 - Contribution margin analysis The actual variable...Ch. 20 - Inventory valuation under absorption costing and...Ch. 20 - Income statements under absorption costing and...Ch. 20 - Income statements under absorption costing and...Ch. 20 - Cost of goods manufactured, using variable costing...Ch. 20 - Variable costing income statement On June 50, the...Ch. 20 - Absorption costing income statement On July 31,...Ch. 20 - Variable costing income statement The following...Ch. 20 - Estimated income statements, using absorption and...Ch. 20 - Variable and absorption costing Ansara Company had...Ch. 20 - Variable and absorption costingthree products...Ch. 20 - Prob. 20.11EXCh. 20 - Product profitability analysis Power Train Sports...Ch. 20 - Territory and product profitability analysis Coast...Ch. 20 - Prob. 20.14EXCh. 20 - Segment profitability analysis The marketing...Ch. 20 - Prob. 20.16EXCh. 20 - Prob. 20.17EXCh. 20 - Prob. 20.18EXCh. 20 - Contribution margin analysis variable costs Based...Ch. 20 - Variable costing income statement for a service...Ch. 20 - Contribution margin reporting and analysis for a...Ch. 20 - Variable costing income statement and contribution...Ch. 20 - Prob. 20.1APRCh. 20 - Income statements under absorption costing and...Ch. 20 - Absorption and variable costing income statements...Ch. 20 - Salespersons' report and analysis Walthman...Ch. 20 - Prob. 20.5APRCh. 20 - Contribution margin analysis Dozier Industries...Ch. 20 - Absorption and variable costing income statements...Ch. 20 - Income statements under absorption costing and...Ch. 20 - Absorption and variable costing income statements...Ch. 20 - Salespersons' report and analysis Pachec Inc....Ch. 20 - Prob. 20.5BPRCh. 20 - Contribution margin analysis Mathews Company...Ch. 20 - Prob. 20.1CPCh. 20 - Prob. 20.3CPCh. 20 - Prob. 20.4CPCh. 20 - Prob. 20.5CP
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