MANAGERIAL ACCOUNTING FUND. W/CONNECT
5th Edition
ISBN: 9781259688713
Author: Wild
Publisher: MCG
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Chapter 6, Problem 1PSB
To determine
Concept introduction:
Variable Costing Income Statement:
In Variable Costing Income Statement, all the variable expenses are subtracted from total Income to derive the contribution margin and then all fixed expenses are subtracted to arrive at the net profit or loss.
Absorption Costing Income Statement:
Absorption costing is the traditional method of Income statement preparation. Under absorption costing both variable and fixed costs are considered as cost of production and allocated to the units lying in the finished stock inventory.
Requirement 1:
To prepare:
The variable costing Income statement.
To determine
Concept introduction:
Variable Costing Income Statement:
In Variable Costing Income Statement, all the variable expenses are subtracted from total Income to derive the contribution margin and then all fixed expenses are subtracted to arrive at the net profit or loss.
Absorption Costing Income Statement:
Absorption costing is the traditional method of Income statement preparation. Under absorption costing both variable and fixed costs are considered as cost of production and allocated to the units lying in the finished stock inventory.
Requirement 2:
To explain:
The difference in income between Variable costing and absorption Costing Income Statement.
Expert Solution & Answer
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The following information applies to the questions displayed below.]Dowell Company produces a single product. Its income statements under absorption costing for its first two years of operation follow.
2018
2019
Sales ($46 per unit)
$
920,000
$
1,840,000
Cost of goods sold ($31 per unit)
620,000
1,240,000
Gross margin
300,000
600,000
Selling and administrative expenses
290,000
340,000
Net income
$
10,000
$
260,000
Additional Information
Sales and production data for these first two years follow.
2018
2019
Units produced
30,000
30,000
Units sold
20,000
40,000
Variable cost per unit and total fixed costs are unchanged during 2018 and 2019. The company's $31 per unit product cost consists of the following.
Direct materials
$
5
Direct labor
9
Variable overhead
7
Fixed overhead ($300,000/30,000 units)
10
Total product cost per unit
$
31
Selling…
ed
Dowell Company produces a single product. Its income statements under absorption costing for its first two years of
operation follow.
Income Statements (Absorption
Costing)
Sales ($60 per unit)
Year 1
$
Year 2
$
1,920,000 3,960,000
Cost of goods sold ($45 per unit) 1,440,000 2,970,000
Gross profit
480,000
990,000
Selling and administrative
expenses
ok
Income
t
338,000 474,000
$ 142,000 $ 516,000
Additional Information
a. Sales and production data for these first two years follow.
Year 1 Year 2
nces
Units
Units
produced
49,000
49,000
Units sold 32,000 66,000
b. Variable costs per unit and fixed costs per year are unchanged during these years. The company's $45 per unit
product cost using absorption costing consists of the following.
Direct materials
Direct labor
$ 12
19
Variable overhead
Fixed overhead ($539,000/49,000
units)
3
11
Total product cost per unit
$ 45
c. Selling and administrative expenses consist of the following.
Selling and Administrative Expenses
Variable selling and…
The following information relates to the Jasmine Company for the upcoming year: Sales
Amount
Per Unit
Sales
$8,120,000
6,496,000
$32.00
Cost of goods sold
Gross margin
Operating expenses
22.00
1,624,000
10.00
690,000
3.00
Operating profits
$ 934,900
$ 7.00
The cost of goods sold includes $2,375,100 of fixed manufacturing overhead; the operating expenses include
$223,100 of fixed marketing expenses. A special order offering to buy 56.000 units for $16.20 per unit has
been made to Jasmine. Fortunately, there will be no additional operating expenses associated with the order;
however, Jasmine is operating at full capacity. How much will operating profits increase if Jasmine accepts the
special order?
Multiple Choice
$280,000.
$140,000.
$56,000.
Operating profits will not increase as a result of accepting the special order.
Chapter 6 Solutions
MANAGERIAL ACCOUNTING FUND. W/CONNECT
Ch. 6 - Prob. 1MCQCh. 6 - Prob. 2MCQCh. 6 - Prob. 3MCQCh. 6 - Prob. 4MCQCh. 6 - Prob. 5MCQCh. 6 - Prob. 1DQCh. 6 - Prob. 2DQCh. 6 - Prob. 3DQCh. 6 - Prob. 4DQCh. 6 - Prob. 5DQ
Ch. 6 - Prob. 6DQCh. 6 - Prob. 7DQCh. 6 - Prob. 8DQCh. 6 - Prob. 9DQCh. 6 - Prob. 10DQCh. 6 - Prob. 11DQCh. 6 - Prob. 12DQCh. 6 - Prob. 13DQCh. 6 - Prob. 14DQCh. 6 - Prob. 1QSCh. 6 - Prob. 2QSCh. 6 - Prob. 3QSCh. 6 - Prob. 4QSCh. 6 - Prob. 5QSCh. 6 - Prob. 6QSCh. 6 - Prob. 7QSCh. 6 - Prob. 8QSCh. 6 - Prob. 9QSCh. 6 - Prob. 10QSCh. 6 - Prob. 11QSCh. 6 - Prob. 12QSCh. 6 - Prob. 13QSCh. 6 - Prob. 14QSCh. 6 - Prob. 15QSCh. 6 - Prob. 16QSCh. 6 - Prob. 17QSCh. 6 - Prob. 18QSCh. 6 - Prob. 1ECh. 6 - Prob. 2ECh. 6 - Sims Company, a manufacturer of table computers,...Ch. 6 - Prob. 4ECh. 6 - Prob. 5ECh. 6 - Prob. 6ECh. 6 - Prob. 7ECh. 6 - Prob. 8ECh. 6 - Prob. 9ECh. 6 - Prob. 10ECh. 6 - Prob. 11ECh. 6 - Prob. 12ECh. 6 - Prob. 13ECh. 6 - Prob. 14ECh. 6 - Prob. 15ECh. 6 - A recent annual report for McDonalds reports the...Ch. 6 - Dowell Company produces a single product, its...Ch. 6 - Trez Company began operations this year. During...Ch. 6 - Prob. 3PSACh. 6 - Prob. 1PSBCh. 6 - Prob. 2PSBCh. 6 - Prob. 3PSBCh. 6 - (This serial problem began in Chapter 1 and...Ch. 6 - Apples coding inventory amounts (in $ millions)...Ch. 6 - Prob. 2BTNCh. 6 - Prob. 3BTNCh. 6 - Prob. 4BTNCh. 6 - Prob. 5BTNCh. 6 - Prob. 6BTNCh. 6 - Happy Family Brands, which was launched by...Ch. 6 - Prob. 8BTNCh. 6 - Prob. 9BTN
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