Bundle: Managerial Accounting, Loose-leaf Version, 14th - Book Only
14th Edition
ISBN: 9781337541398
Author: Carl Warren; James M. Reeve; Jonathan Duchac
Publisher: Cengage Learning
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Chapter 6, Problem 7E
(a)
To determine
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.
To Prepare: The income statement under the variable costing concept of Company P&G.
(b)
To determine
To Explain: The impact would have been in income from operations under absorption costing in the income statement, if inventories reduced during the period.
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Variable Costing Income Statement
The following data were adapted from a recent income statement of The Procter & Gamble Company (PG):
(in millions)
Sales
$65,058
Operating costs:
Cost of products sold
$(32,535)
Marketing, administrative, and other expenses
(18,568)
Total operating costs
$(51,103)
Operating income
$13,955
Assume that the variable amount of each category of operating costs is as follows:
(in millions)
Cost of products sold
$19,500
Marketing, administrative, and other expenses
14,000
a. Based on the data given, prepare a variable costing income statement for Procter & Gamble, assuming that the company maintained constant inventory levels during the period.
The Procter & Gamble Company
Variable Costing Income Statement (assumed)
(in millions)
Sales
Variable cost of products sold
Manufacturing margin
Variable marketing, administrative, and other expenses…
Variable Costing Income Statement
The following data were adapted from a recent income statement of The Procter & Gamble Company (PG):
(in millions)
$181,390
Sales
Operating costs:
Cost of products sold
Marketing, administrative, and other expenses
Total operating costs
$(87,070)
(58,040)
$(145,110)
$36,280
Operating income
Assume that the variable amount of each category of operating costs is as follows:
(in millions)
$48,980
23,580
Cost of products sold
Marketing, administrative, and other expenses
a. Based on the data given, prepare a variable costing income statement for Procter & Gamble, assuming that the company maintained constant inventory levels during the period.
The Procter & Gamble Company
Variable Costing Income Statement
(assumed)
(in millions)
Line Item Description Amount Amount
Fixed costs:
| A
b. If Procter & Gamble reduced its inventories during the period, what impact would that have on the operating income determined under absorption costing?
If Procter & Gamble…
Variable Costing Income Statement
The following data were adapted from a recent income
statement of The Bluth Company:
Sales
Operating costs:
Cost of products sold
Marketing, administrative, and other expenses
Total operating costs
Operating income
Cost of products sold
Marketing, administrative, and other expenses
The Bluth Company
Variable Costing Income
Assume that the variable amount of each category of operating
costs is as follows:
Statement (assumed)
(in millions)
(in
millions)
$162,030
Fixed costs:
$(77,770)
(51,850)
a. Based on the data given, prepare a variable costing income
statement for Bluth, assuming that the company maintained
constant inventory levels during the period.
$(129,620)
$32,410
would be
(in millions)
$43,750
21,060
b. If the Bluth company reduced its inventories during the
period, what impact would that have on the operating income
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Chapter 6 Solutions
Bundle: Managerial Accounting, Loose-leaf Version, 14th - Book Only
Ch. 6 - What types of costs are customarily included in...Ch. 6 - Which type of manufacturing cost (direct...Ch. 6 - Which of the following costs would be included in...Ch. 6 - In the variable costing income statement, how are...Ch. 6 - Prob. 5DQCh. 6 - Discuss how financial data prepared on the basis...Ch. 6 - Prob. 7DQCh. 6 - Explain why rewarding sales personnel on the basis...Ch. 6 - Prob. 9DQCh. 6 - Prob. 10DQ
Ch. 6 - Explain why service companies use different...Ch. 6 - Prob. 1BECh. 6 - Prob. 2BECh. 6 - Prob. 3BECh. 6 - Prob. 4BECh. 6 - Contribution margin by segment The following...Ch. 6 - Prob. 6BECh. 6 - Prob. 1ECh. 6 - Prob. 2ECh. 6 - Prob. 3ECh. 6 - Prob. 4ECh. 6 - Variable costing income statement On November 30,...Ch. 6 - Absorption costing income statement On March 31....Ch. 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 - Prob. 16ECh. 6 - Prob. 17ECh. 6 - Prob. 18ECh. 6 - Prob. 19ECh. 6 - Variable costing income statement for a service...Ch. 6 - Prob. 21ECh. 6 - Variable costing income statement for a service...Ch. 6 - Prob. 1PACh. 6 - Prob. 2PACh. 6 - Prob. 3PACh. 6 - Salespersons report and analysis Walthman...Ch. 6 - Prob. 5PACh. 6 - Prob. 6PACh. 6 - Absorption and variable costing income statements...Ch. 6 - Income statements under absorption costing and...Ch. 6 - Absorption and variable costing income statements...Ch. 6 - Prob. 4PBCh. 6 - Prob. 5PBCh. 6 - Prob. 6PBCh. 6 - Prob. 1ADMCh. 6 - Prob. 2ADMCh. 6 - Prob. 3ADMCh. 6 - Prob. 4ADMCh. 6 - Prob. 1TIFCh. 6 - Inventory effects under absorption costing BendOR,...Ch. 6 - Prob. 3TIF
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