Chapter 6, Problem 1AE

	A	B	C	D	E
1	Chapter 6: Applying Excel
2
3	Data
4	Selling price per unit	$50
5	Manufacturing costs
6	Variable per unit produced
7	Direct materials	$11
8	Direct labour
9	Variable manufacturing overhead	$6
10	Fixed manufacturing overhead per year	$120,000
11	Selling and administrative expenses
12	Variable per unit sold	$4
13	Fixed per year	$70 000
14
15		Year 1	Year 2
16	Units in beginning inventory	0	?
17	Units produced doing the year	10 000	6 000
18	Units sold doing the year	8 000	8 000
19
20	Enter a formula into each of the cells marked with a ? below
21	Review Problem 1: Contrasting Variable and Absorption Costing
22
23	Compute the Ending Inventory
24		Year 1	Year 2
25	Units in beginning inventory	0	?
26	Units produced doing the year	?	?
27	Units sold doing the year	?	?
28	Units in ending inventory	?	?
29
30	Compute the Absorption Costing Unit Product Cost
31		Year 1	Year 2
32	Direct materials	?	?
33	Direct labour	?	?
34	Variable manufacturing overhead	?	?
35	Fixed manufacturing overhead	?	?
36	Absorption costing unit product cost	?	?
37
38	Construct the Absorption Costing Income Statement
39		Year 1	Year 2
40	Sales	?	?
41	Cost of goods sold	?	?
42	Gross margin	?	?
43	Selling and administrative expenses	?	?
44	Net operating income	?	?
45
46	Compute the Variable Costing Unit Product Cost
47		Year 1	Year 2
48	Direct materials	?	?
49	Direct labour	?	?
50	Variable manufacturing overhead	?	?
51	Variable costing unit product cost	?	?
52
53	Construct the Variable Costing Income Statement
54		Year 1		Year 2
55	Sales		?		?
56	Variable expenses
57	Variable cost of goods sold		?		?
58	Variable selling and administrative expenses	?	?	?	?
59	Contribution margin		?		?
60	Fixed expenses
61	Fixed manufacturing overhead	?		?
62	Fixed selling and administrative expenses	?	?	?	?
63	Net operating income		?		?

You should proceed to the requirements below only after completing your worksheet. The LIFO inventory flow assumption is used throughout this problem.

Required:

1. Check your worksheet by changing the units sold in the Data to 6,000 for Year 2. The cost of goods sold under absorption costing for Year 2 should now be $24-0.000. If it isn't check cell C41. The formula in this cell should be =IF(C26 Why is the absorption costing net operating income now equal to the variable costing net operating income in Year 2?