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Concept explainers
Prepare income statements under absorption costing and variable costing for a company with beginning inventory, and reconcile differences
(LO 5), AN
(a) 2017 $2,700,000
(b) 2017 $2,350,000
Jackson Company produces plastic that is used for injection-molding applications such as gears for small motors. In 2016, the first year of operations, Jackson produced 4,000 tons of plastic and sold 3,500 tons. In 2017, the production and sales results were exactly reversed. In each year, the selling price per ton was $2,000, variable
Instructions
(a) Prepare income statements for each year using variable costing. (Use the format from Illustration 6A-5.)
(b) Prepare income statements for each year using absorption costing. (Use the format from Illustration 6A-4.)
(c) Reconcile the differences each year in net income under the two costing approaches.
(d) _______ Comment on the effects of production and sales on net income under the two costing approaches.
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Chapter 6 Solutions
Managerial Accounting: Tools For Business Decision Making, Seventh Edition Wileyplus Card
- Using the information in the previous exercises about Marleys Manufacturing, determine the operating income for department B, assuming department A sold department B 1,000 units during the month and department A reduces the selling price to the market price.arrow_forwardCost of Goods Manufactured, Income Statement W. W. Phillips Company produced 4,000 leather recliners during the year. These recliners sell for 400 each. Phillips had 500 recliners in finished goods inventory at the beginning of the year. At the end of the year, there were 700 recliners in finished goods inventory. Phillips accounting records provide the following information: Required: 1. Prepare a statement of cost of goods manufactured. 2. Compute the average cost of producing one unit of product in the year. 3. Prepare an income statement for external users.arrow_forwardThe following data have been taken from the records of a company: Production in units during 2011 200,000 Units sold during 2011 190,000 Selling Price per unit P 15.00 Standard Variable Costs per unit Material and Labor P 8.00 Indirect Manufacturing Costs 2.00 Selling and Administrative expenses 1.00 Fixed Costs budgeting for the year Indirect Manufacturing Costs P 400,000 Selling & Administrative Expenses P 300,000 Required: A. Determine the income (loss) before income taxes for the year 2011 under Absorption Costing?arrow_forward
- Use the information given below to prepare the Income statement of Kendall Manufacturers for October 2023 using the following methods: 2.1 Marginal costing 2.2 Absorption costing INFORMATION October 2023: The following information was provided by Kendall Manufacturers for the only product produced during Opening inventory 0 Number of units manufactured 5000 Sales R4 200 000 Selling price per unit R1000 Variable manufacturing costs per unit R425 Fixed manufacturing overhead cost R325 000 Variable selling cost per unit R80 Fixed selling cost R175 000 Fixed administrative cost R200arrow_forwardReview the income statements on the Absorption Statement and Variable Statement panels, then complete the following table. The company’s sales price per unit is $75.00, and the number of units in ending inventory is 5,000. Item Amount Number of units sold Variable sales and administrative cost per unit Number of units manufactured Variable cost of goods manufactured per unit Fixed manufacturing cost per unit Saxon, Inc. Absorption Costing Income Statement For the Year Ended December 31 1 Sales $1,125,000.00 2 Cost of goods sold: 3 Beginning inventory $0.00 4 Cost of goods manufactured 840,000.00 5 Ending inventory (210,000.00) 6 Total cost of goods sold 630,000.00 7 Gross profit $495,000.00 8 Selling and administrative expenses 275,000.00 9 Income from operations $220,000.00 Saxon, Inc. Variable…arrow_forwardWilliam Company makes a single product, bucket stoppers. During 2017, 155,000 units were sold and 150,000 units were produced. Information for 2017 appears below: Beginning inventory in units Variable production cost per unit Variable operating costs per unit Fixed production cost per year Fixed selling and administrative cost per year Selling price per unit 6,000 $1.20 $0.80 $127,500 $32,000 $6.00 How much is the contribution margin for 2017 under variable costing?arrow_forward
- Pennell Company gathered the following information for the year ended December 31, 2018. During the year, Pennell produced and sold 75,000 units of product at a sale price of $6.60 per unit. There was no beginning inventory of product on January 1, 2018. What is Margin of ?Safety in units Fixed costs: Manufacturing Marketing Administrative $180,000 55,000 25,000 Variable costs: $112,500 Manufacturing Marketing Administrative 37,500 45,000 45,000 O 75,000 O 10,000 O 30,000 65,000 Oarrow_forward.Kipling Company has sales of $1,500,000 for the first quarter of 2016. In making the sales, the company incurred the following costs and expenses. Variable Fixed Product costs $500,000 $550,000 Selling expenses 100,000 75,000 Administrative expenses 80,000 67,000 Instructions Calculate net income under CVP for 2016.arrow_forwardJoshua Company has determined the following selling price and manufacturing cost per unit based on normal production of 72,000 units per year: Selling price per unit.. $ 22 Variable cost per unit: Direct materials... $ 4 Direct labor ..... 4 Variable factory overhead.. 2 Variable cost per unit $ 10 Fixed costs: Fixed factory overhead per year $ 360,000 Fixed selling and administrative expense per year........ 48,000 Month Units Produced Units Sold October.. 6,000 3,000 November ...... 1,000 4,000 December...... 8,000 6,000 October has no beginning inventories. REQUIRED: Prepare comparative income statements, including a comparative schedule of cost of goods sold, for each of these three months in 2016 under each of the following: 1. Absorption costing (include under- or overapplied overhead). 2. Variable costing.arrow_forward
- Scott Manufacturing makes only one product with total unit manufacturing costs of $59, of which $41 is variable. No units were on hand at the beginning of 2015. During 2015 and 2016, the only product manufactured was sold for $93 per unit, and the cost structure did not change. Scott uses the first-in, first-out inventory method and has the following production and sales for 2015 and 2016 Units Manufactured Units Sold 2015 120,000 90,000 2016 120,000 130,000 a. Prepare gross profit computations for 2015 and 2016 using absorption costing.Do not use negative signs with your answers. Absorption Costing 2015 2016 Sales Answer Answer Cost of goods sold: Beginning inventory Answer Answer Production Answer Answer Goods available Answer Answer Less: Ending inventory Answer Answer Cost of goods sold Answer Answer Gross profit Answer Answer b. Prepare gross profit computations for 2015 and 2016 using…arrow_forwardUse below information for Questions 1 to 3: Company X manufactures cosmetic products that are sold through a network of sales agents. The agents are paid a commission at a percent of sales basis. Partial income statement for the year ending Dec 31, 2017, is as follows: Item Amount (TL) Sales 79,000,000 COGS Variable 31,540,000 8,610,000 Fixed Selling and marketing expenses Commissions 13,530,000 10,210,000 Fixed costs The company is considering hiring its own sales staff to replace the network of agents. It will pay its salespeople a commission of 8.10% and incur additional fixed costs of TL7,530,000. Q-1) Calculate the degree of operating leverage at sales TL79,000,000 if the company uses sales agents. Q-2) Assume the company employs its own sales staff. Calculate the change in net income in TL if sales decrease by 10%. Q-3) Calculate the estimated sales volume in sales TL that would generate an identical net income for the year ending December 31, 2017, regardless of whether the…arrow_forwardCircetrax, Inc. has provided the following financial information for the year: Finished Goods Inventory: Beginning balance, in units Units produced Units sold Ending balance, in units Production costs: Variable manufacturing costs per unit Total fixed manufacturing costs What is the unit product cost for the year using absorption costing? OA. $117 630 1,400 1,500 530 $50 $42,000 Warrow_forward
- Managerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage LearningPrinciples of Cost AccountingAccountingISBN:9781305087408Author:Edward J. Vanderbeck, Maria R. MitchellPublisher:Cengage LearningPrinciples of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College
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