![Bundle: Managerial Accounting, Loose-leaf Version, 14th - Book Only](https://www.bartleby.com/isbn_cover_images/9781337541398/9781337541398_largeCoverImage.gif)
Concept explainers
1.
Absorption Costing
Absorption costing is compulsory under Generally Accepted Accounting Principles (GAAP) for financial statements circulated to the external users. Under absorption costing, the cost of goods manufactured includes direct materials, direct labor, and
Variable Costing
Managers frequently use variable costing for internal purposes for taking decision making. The cost of goods manufactured includes direct materials, direct labor, and variable factory overhead. Fixed factory overhead treated as period (fixed) expense.
The income statement according to the absorption costing concept for the Company RZM.
2.
The income statement according to the variable cost concept for the Company RZM.
3.
To describe: The temporary loss for suspending the production of the May month.
4.
To discuss: The solvent production of Company RZM, and advice to management.
![Check Mark](/static/check-mark.png)
Want to see the full answer?
Check out a sample textbook solution![Blurred answer](/static/blurred-answer.jpg)
Chapter 6 Solutions
Bundle: Managerial Accounting, Loose-leaf Version, 14th - Book Only
- Bolger and Co. manufactures large gaskets for the turbine industry. Bolgers per-unit sales price and variable costs for the current year are as follows: Bolgers total fixed costs aggregate to 360,000. Bolgers labor agreement is expiring at the end of the year, and management is concerned about the effects of a new labor agreement on its break-even point in units. The controller performed a sensitivity analysis to ascertain the estimated effect of a 10-per-unit direct labor increase and a 10,000 reduction in fixed costs. Based on these data, the break-even point would: a. decrease by 1,000 units. b. decrease by 125 units. c. increase by 375 units. d. increase by 500 units.arrow_forwardLife-Cycle Cost Management and Target Costing Nico Parts, Inc., produces electronic products with short life cycles (of less than two years). Development has to be rapid, and the profitability of the products is tied strongly to the ability to find designs that will keep production and logistics costs low. Recently, management has also decided that post-purchase costs are important in design decisions. Last month, a proposal for a new product was presented to management. The total market was projected at 220,000 units (for the two-year period). The proposed selling price was $145 per unit. At this price, market share was expected to be 25 percent. The manufacturing and logistics costs were estimated to be $136 per unit. Upon reviewing the projected figures, Brian Metcalf, president of Nico, called in his chief design engineer, Mark Williams, and his marketing manager, Cathy McCourt. The following conversation was recorded: BRIAN: Mark, as you know, we agreed that a profit of $13 per…arrow_forwardLife-Cycle Cost Management and Target Costing Nico Parts, Inc., produces electronic products with short life cycles (of less than two years). Development has to be rapid, and the profitability of the products is tied strongly to the ability to find designs that will keep production and logistics costs low. Recently, management has also decided that post-purchase costs are important in design decisions. Last month, a proposal for a new product was presented to management. The total market was projected at 220,000 units (for the two-year period). The proposed selling price was $145 per unit. At this price, market share was expected to be 25 percent. The manufacturing and logistics costs were estimated to be $136 per unit. Upon reviewing the projected figures, Brian Metcalf, president of Nico, called in his chief design engineer, Mark Williams, and his marketing manager, Cathy McCourt. The following conversation was recorded: BRIAN: Mark, as you know, we agreed that a profit of $13 per…arrow_forward
- Current Attempt in Progress The fastener division of Southern Fasteners manufactures zippers and then sells them to customers for $7.80 per unit. Its variable cost is $2.97 per unit, and its fixed cost per unit is $1.55. Management would like the fastener division to transfer 11,200 of these zippers to another division within the company at a price of $2.97. The fastener division could avoid $0.43 per zipper of variable packaging costs by selling internally. Determine the minimum transfer price. (a) Assuming the fastener division is not operating at full capacity. (Round answer to 2 decimal places, e.g. 10.50.) Minimum transfer price $ (b) Assuming the fastener division is operating at full capacity. (Round answer to 2 decimal places, e.g. 10.50.) Minimum transfer price $arrow_forwardPreparing variable and absorption costing income statements This problem continues the Piedmont Computer Problem situation from Chapter 20. Piedmont Computer Company manufactures personal computers and tablets. Based on the latest information from the cost accountant, using the current sales mix, the weighted-average sales price per unit is $750 and the weighed-average variable cost per unit is $450. The company does not expect the sales mix to vary for the next year. Assume the beginning balance in Finished Goods Inventory is $0. Additional data for the first month of 2020: Requirements Compute the product cost per unit produced under absorption costing and under variable costing. Prepare income statements for January 2020 using: absorption costing. variable costing. 3. Is operating income higher under absorption costing or variable costing in January? What causes the difference?arrow_forwardProduct Decisions Under Bottlenecked Operations Youngstown Glass Company manufactures three types of safety plate glass: large, medium, and small. All three products have high demand. Thus, Youngstown Glass is able to sell all the safety glass that it can make. The production process includes an autoclave operation, which is a pressurized heat treatment. The autoclave is a production bottleneck. Total fixed costs are $290,000 for the company as a whole. In addition, the following information is available about the three products: Large Medium Small Unit selling price $99 $396 $415 Unit variable cost 78 324 365 Unit contribution margin $ 21 $ 72 $ 50 Autoclave hours per unit 2 6 4 Total process hours per unit 6 12 12 Budgeted units of production 4,500 4,500 4,500 a. Determine the contribution margin by glass type and the total company income from operations for the budgeted units of production. Large Medium…arrow_forward
- Product Decisions Under Bottlenecked Operations Youngstown Glass Company manufactures three types of safety plate glass: large, medium, and small. All three products have high demand. Thus, Youngstown Glass is able to sell all the safety glass it can make. The production process includes an autoclave operation, which is a pressurized heat treatment. The autoclave is a production bottleneck. Total fixed costs are $167,000 for the company as a whole. In addition, the following information is available about the three products: Large Medium Small Unit selling price $381 $209 $199 Unit variable cost 300 171 175 Unit contribution margin $ 81 $ 38 $ 24 Autoclave hours per unit 6 4 2 Total process hours per unit 18 8 6 Budgeted units of production 2,600 2,600 2,600 a. Determine the contribution margin by glass type and the total company income from operations for the budgeted units of production. Large Medium Small Total Units…arrow_forwardProduct Decisions Under Bottlenecked Operations Youngstown Glass Company manufactures three types of safety plate glass: large, medium, and small. All three products have high demand. Thus, Youngstown Glass is able to sell all the safety glass that it can make. The production process includes an autoclave operation, which is a pressurized heat treatment. The autoclave is a production bottleneck. Total fixed costs are $91,000 for the company as a whole. In addition, the following information is available about the three products: Unit selling price Unit variable cost Unit contribution margin Autoclave hours per unit Total process hours per unit Budgeted units of production Large Medium Small $240 $94 $199 (189) (77) (175) $ 51 $ 17 $ 24 6 2 4 18 4 8 2,200 2,200 2,200 a. Determine the contribution margin by glass type and the total company operating income for the budgeted units of production. Large Medium Small Units produced Revenues Variable costs Contribution margin Fixed costs…arrow_forwardProduct Decisions Under Bottlenecked Operations Youngstown Glass Company manufactures three types of safety plate glass: large, medium, and small. All three products have high demand. Thus, Youngstown Glass is able to sell all the safety glass that it can make. The production process includes an autoclave operation, which is a pressurized heat treatment. The autoclave is a production bottleneck. Total fixed costs are $176,000 for the company as a whole. In addition, the following information is available about the three products: Line Item Description Large Medium Small Unit selling price $254 $143 $266 Unit variable cost (200) (117) (234) Unit contribution margin $ 54 $ 26 $ 32 Autoclave hours per unit 6 2 4 Total process hours per unit 12 4 12 Budgeted units of production 3,500 3,500 3,500 a. Determine the contribution margin by glass type and the total company operating income for the budgeted units of production. Line Item Description Large…arrow_forward
- Aldovar Company produces a variety of chemicals. One division makes reagents for laboratories. The divisions projected income statement for the coming year is: Required: 1. Compute the contribution margin per unit, and calculate the break-even point in units. (Note: Round answer to the nearest unit.) Calculate the contribution margin ratio and use it to calculate the break-even sales revenue. (Note: Round contribution margin ratio to four decimal places, and round the break-even sales revenue to the nearest dollar.) 2. The divisional manager has decided to increase the advertising budget by 250,000. This will increase sales revenues by 1 million. By how much will operating income increase or decrease as a result of this action? 3. Suppose sales revenues exceed the estimated amount on the income statement by 1,500,000. Without preparing a new income statement, by how much are profits underestimated? 4. Compute the margin of safety based on the original income statement. 5. Compute the degree of operating leverage based on the original income statement. If sales revenues are 8% greater than expected, what is the percentage increase in operating income? (Note: Round operating leverage to two decimal places.)arrow_forwardSegment variable costing income statement and effect on operating income of change in operations Valdespin Company manufactures three sizes of camping tentssmall (S), medium (M), and large (L). The income statement has consistently indicated a net loss for the M size, and management is considering three proposals: (1) continue Size M, (2) discontinue Size M and reduce total output accordingly, or (3) discontinue Size M and conduct an advertising campaign to expand the sales of Size S so that the entire plant capacity can continue to be used. If Proposal 2 is selected and Size M is discontinued and production curtailed, the annual fixed production costs and fixed operating expenses could be reduced by 46,080 and 32,240, respectively. If Proposal 3 is selected, it is anticipated that an additional annual expenditure of 34,560 for the rental of additional warehouse space would yield an additional 130% in Size S sales volume. It is also assumed that the increased production of Size S would utilize the plant facilities released by the discontinuance of Size M. The sales and costs have been relatively stable over the past few years, and they are expected to remain so for the foreseeable future. The income statement for the past year ended June 30, 20Y9, is as follows: Instructions 1. Prepare an income statement for the past year in the variable costing format. Use the following headings: Data for each size should be reported through contribution margin. The fixed costs should be deducted from the total contribution margin, as reported in the Total column, to determine operating income. 2. Based on the income statement prepared in (1) and the other data presented, determine the amount by which total annual operating income would be reduced below its present level if Proposal 2 is accepted. 3. Prepare an income statement in the variable costing format, indicating the projected annual operating income if Proposal 3 is accepted. Use the following headings: Data for each style should be reported through contribution margin. The fixed costs should be deducted from the total contribution margin as reported in the Total column. For purposes of this problem, the expenditure of 34,560 for the rental of additional warehouse space can be added to the fixed operating expenses. 4. By how much would total annual operating income increase above its present level if Proposal 3 is accepted? Explain.arrow_forwardDifferential analysis for machine replacement proposal Lexigraphic Printing Company is considering replacing a machine that has been used in its factory for four years. Relevant data associated with the operations of the old machine and the new machine, neither of which has any estimated residual value, are as follows: Annual nonmanufacturing operating expenses and revenue are not expected to be affected by purchase of the new machine. Instructions 1. Prepare a differential analysis as of April 30 comparing operations using the present machine (Alternative 1) with operations using the new machine (Alternative 2). The analysis should indicate the total differential profit that would result over the six-year period if the new machine is acquired. 2. List other factors that should be considered before a final decision is reached.arrow_forward
- Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College PubFinancial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
- Managerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage Learning
![Text book image](https://www.bartleby.com/isbn_cover_images/9781337912020/9781337912020_smallCoverImage.jpg)
![Text book image](https://www.bartleby.com/isbn_cover_images/9781337902663/9781337902663_smallCoverImage.jpg)
![Text book image](https://www.bartleby.com/isbn_cover_images/9781305970663/9781305970663_smallCoverImage.gif)
![Text book image](https://www.bartleby.com/isbn_cover_images/9781337115773/9781337115773_smallCoverImage.gif)