GEN COMBO MANAGERIAL ACCOUNTING FOR MANAGERS; CONNECT 1S ACCESS CARD
GEN COMBO MANAGERIAL ACCOUNTING FOR MANAGERS; CONNECT 1S ACCESS CARD
4th Edition
ISBN: 9781259911682
Author: Eric Noreen
Publisher: McGraw-Hill Education
Question
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Chapter 5, Problem 1AE

1.

To determine

Introduction: Absorption costing is a technique for calculating cost of product by taking indirect expense and direct cost into consideration.

To check: Worksheet and complete the calculation

1.

Expert Solution
Check Mark

Answer to Problem 1AE

Complete worksheet is given below

Explanation of Solution

    Data Amount $`Amount $
    Selling price per unit 50
    Manufacturing cost
    Variable per unit product
    Direct material 11
    Direct labor 6
    Variable manufacturing overhead 3
    Fixed manufacturing overhead per year 120000
    Selling and administrative expenses
    Variable per unit sold 4
    Fixed per year70000
    Year 1Year 2
    Units in beginning inventory0
    Units produced during the year100006000
    Units sold during the year80008000
    Contrasting variable and absorption costing
    Ending inventory
    Units beginning inventory02000
    Units product during the year 100006000
    Unit sold during the year80008000
    Units in ending inventory20000
    The absorption costing units product cost
    Direct material 1111
    Direct labor 66
    Variable manufacturing overhead33
    Fixed manufacturing overhead1220
    Absorption costing per unit product cost3240
    The absorption costing income statement
    Sales 400000400000
    Cost of goods256000304000
    Gross margin 14400096000
    Selling and administrative expense 102000102000
    Net operating income 42000(6000)
    The variable costing unit products cost
    Direct materials 1111
    Direct labor 66
    Variable manufacturing overhead33
    Variable costing units production cost2020
    Data Year 1Year 2
    Amount $Amount $Amount $Amount $
    Variable costing income statement.400000400000
    Sales
    Variable expense
    Variable cost of goods sold 160000160000
    Variable selling and administrative expense 3200019200032000192000
    Contribution margin 208000208000
    Fixed expense
    Fixed manufacturing overhead120000120000
    Fixed selling and administrative expense 7000019000070000190000
    Net operating income 1800018000

Net operating income of the company:

    Data Amount $`Amount $
    Selling price per unit 50
    Manufacturing cost
    Variable per unit product
    Direct material 11
    Direct labor 6
    Variable manufacturing overhead 3
    Fixed manufacturing overhead per year 120,000
    Selling and administrative expenses
    Variable per unit sold 4
    Fixed per year70,000
    Year 1Year 2
    Units in beginning inventory0
    Units produced during the year100006,000
    Units sold during the year80006,000
    Contrasting variable and absorption costing
    Ending inventory
    Units beginning inventory02,000
    Units product during the year 10,0006,000
    Unit sold during the year8,0006,000
    Units in ending inventory2,0002,000
    The absorption costing units product cost
    Direct material 1111
    Direct labor 66
    Variable manufacturing overhead33
    Fixed manufacturing overhead1220
    Absorption costing per unit product cost3240
    The absorption costing income statement
    Sales 400,000300,000
    Cost of goods256,000240,000
    Gross margin 144,00060,000
    Selling and administrative expense 102,00094,000
    Net operating income 42,000(34,000)
    The variable costing unit products cost
    Direct materials 1111
    Direct labor 66
    Variable manufacturing overhead33
    Variable costing units production cost2020
    Data Year 1Year 2
    Amount $Amount $Amount $Amount $
    Variable costing income statement.400,000300,000
    Sales
    Variable expense
    Variable cost of goods sold 160,000120000
    Variable selling and administrative expense 32,000192,00024,000144,000
    Contribution margin 208,000156,000
    Fixed expense
    Fixed manufacturing overhead120,000120,000
    Fixed selling and administrative expense 70,000190,00070,000190,000
    Net operating income 18,000(34,000)

2.

To determine

Introduction: Absorption costing is a technique for calculating cost of product by taking indirect expense and direct cost into consideration.

To prepare: Traditional format income statement and Contribution format income statement

2.

Expert Solution
Check Mark

Answer to Problem 1AE

Traditional format income statement and Contribution format income statement is given below:

Explanation of Solution

    Data Amount $`Amount $
    Selling price per unit 75
    Manufacturing cost
    Variable per unit product
    Direct material 12
    Direct labor 5
    Variable manufacturing overhead 7
    Fixed manufacturing overhead per year 150000
    Selling and administrative expenses
    Variable per unit sold 1
    Fixed per year60000
    Year 1Year 2
    Units in beginning inventory0
    Units produced during the year1500010000
    Units sold during the year1200012000
    Contrasting variable and absorption costing
    Ending inventory
    Units beginning inventory03000
    Units product during the year 1500010000
    Unit sold during the year1200012000
    Units in ending inventory30001000
    The absorption costing units product cost
    Direct material 1212
    Direct labor 55
    Variable manufacturing overhead77
    Fixed manufacturing overhead1024
    Absorption costing per unit product cost2424
    The absorption costing income statement
    Sales 900,000900,000
    Cost of goods408,000458,000
    Gross margin 492,000442,000
    Selling and administrative expense 72,00072,000
    Net operating income 420,000(37,000)
    The variable costing unit products cost
    Direct materials 1212
    Direct labor 55
    Variable manufacturing overhead77
    Variable costing units production cost2424
    Data Year 1Year 2
    Amount $Amount $Amount $Amount $
    Variable costing income statement.900,000900,000
    Sales
    Variable expense
    Variable cost of goods sold 288,0002,880,000
    Variable selling and administrative expense 12,000300,00012,000300,000
    Contribution margin 600,000600,000
    Fixed expense
    Fixed manufacturing overhead150,000120,000
    Fixed selling and administrative expense 60,000210,00070,000120,000
    Net operating income 390,000(390,000)

3.

To determine

Introduction: Absorption costing is a technique for calculating cost of product by taking indirect expense and direct cost into consideration.

To prepare: Traditional format income statement and Contribution format income statement

3.

Expert Solution
Check Mark

Answer to Problem 1AE

Income statement and Contribution format income statement is given below:

Explanation of Solution

    Data Amount $`Amount $
    Selling price per unit 75
    Manufacturing cost
    Variable per unit product
    Direct material 12
    Direct labor 5
    Variable manufacturing overhead 7
    Fixed manufacturing overhead per year 150,000
    Selling and administrative expenses
    Variable per unit sold 1
    Fixed per year60,000
    Year 1Year 2
    Units in beginning inventory0
    Units produced during the year15,00050,000
    Units sold during the year12,00012,000
    Contrasting variable and absorption costing
    Ending inventory
    Units beginning inventory03,000
    Units product during the year 15,00050,000
    Unit sold during the year12,00012,000
    Units in ending inventory3,00041,000
    The absorption costing units product cost
    Direct material 1212
    Direct labor 55
    Variable manufacturing overhead77
    Fixed manufacturing overhead103
    Absorption costing per unit product cost3427
    The absorption costing income statement
    Sales 900,000900,000
    Cost of goods408,000324,000
    Gross margin 492,000576,000
    Selling and administrative expense 72,00072,000
    Net operating income 420,000(504,000)
    The variable costing unit products cost
    Direct materials 1212
    Direct labor 55
    Variable manufacturing overhead77
    Variable costing units production cost2424
    Data Year 1Year 2
    Amount $Amount $Amount $Amount $
    Variable costing income statement.900,000900,000
    Sales
    Variable expense
    Variable cost of goods sold 2880002880,000
    Variable selling and administrative expense 12000300,00012,000300,000
    Contribution margin 600,000600,000
    Fixed expense
    Fixed manufacturing overhead150000150,000
    Fixed selling and administrative expense 60000210,00060,000210,000
    Net operating income 390,000390,000

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