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Variable and absorption costing and breakeven points. Camino, a leading firm in the sports industry, produces basketballs for the consumer market. For the year ended December 31, 2017, Camino sold 400,0 basketballs at an average selling price of $12 per unit. The following information also relates to 2017 (assume constant unit costs and no variances of any kind):
Inventory, January 1, 2017: 0 basketballs
Inventory, December 31, 2017: 20,000 basketballs
Fixed
Fixed administrative costs: $660,000
Direct materials costs: $ 3 per basketball
Direct labor costs: $ 4 per basketball
- 1. Prepare income statements under (a) variable, (b) absorption, and (c) throughput costing for the year ended December 31, 2017.
- 2. Calculate the breakeven point (in basketballs sold) in 2017 under:
- a. Variable costing
- b. Absorption costing
- c. Throughput costing
- 3. Suppose direct materials costs were $4 per basketball instead. Assuming all other data are the same, calculate the minimum number of basketballs Camino must have sold in 2017 to attain a target operating income of $120,000 under:
- a. Variable costing
- b. Absorption costing
- c. Throughput costing
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Chapter 9 Solutions
Horngren's Cost Accounting, Student Value Edition Plus MyLab Accounting with Pearson eText - Access Card Package (16th Edition)
- Variable and absorption costing and breakeven points. Camino, a leading rm in the sports industry, produces basketballs for the consumer market. For the year ended December 31, 2017, Camino sold 400,000 basketballs at an average selling price of $12 per unit. The following information also relates to 2017 (assume constant unit costs and no variances of any kind):arrow_forwardVariable and absorption costing and breakeven points. Camino, a leading firm in the sports industry, produces basketballs for the consumer market. For the year ended December 31, 2017, Camino sold 400,000 basketballs at an average selling price of $12 per unit. The following information also relates to 2017 (assume constant unit costs and no variances of any kind):arrow_forwardThe Hame Company manufactures trendy, good-looking, moderately priced umbrellas. The following data are for the year ended December 31, 2020: 100,000 units Beginning inventory, January 1, 2020 50,000 units Ending inventory, December 31, 2020 2020 Sales 400,000 units Selling price $25 per unit Variable manufacturing cost per unit, including direct materials $6 per unit Variable selling & admin. cost per unit sold S2 per unit sold Fixed manufacturing costs $1,625,000 Fixed selling & admin. costs $1,100,000 Required: Assume standard costs per unit are the same for units in beginning inventory and units produced during the year. Also, assume no price, spending, or efficiency variances. Prepare income statement under variable costing for the year ended December 31, 2020.arrow_forward
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- .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_forwardCarla Vista Company has the following information available for September 2020. Unit selling price of video game consoles $400 Unit variable costs $240 Total fixed costs $54,400 Units sold 600 Prepare a CVP income statement for the break-even point that shows both total and per unit amounts. CARLA VISTA COMPANYCVP Income StatementFor the Month Ended September 30, 2020 Total Per Unit select an income statement item Administrative ExpensesContribution MarginCost of Goods SoldFixed CostsGross ProfitNet Income/(Loss)SalesSelling ExpensesVariable Costs $enter a dollar amount $enter a dollar amount select an income statement item Administrative ExpensesContribution MarginCost of Goods SoldFixed CostsGross ProfitNet Income/(Loss)SalesSelling ExpensesVariable Costs enter a dollar amount enter a…arrow_forwardErin Mikell Company was concerned that increased sales did not result in increased profits for 2018. Both variable unit and total fixed manufacturing costs for 2017 and 2018 remained constant at $20 and $2,000,000, respectively. In 2017, the company produced 100,000 units and sold 80,000 units at a price of $50 per unit. There was no beginning inventory in 2017. In 2018, the company made 70,000 units and sold 90,000 units at a price of $50. Selling and administrative expenses were all fixed at $100,000 each year. Prepare income statements for each year using absorption costing. Prepare income statements for each year using variable costing. Explain why the income was different each year using the two methods. Support your explanation with computations.arrow_forward
- In 2012, Grant Co. sold 160,000 units of its product at a selling price of $40. The variable cost per unit was $30, and Grant reported net income for the year of $200,000. What was the amount of Grant's fixed costs for the year?arrow_forwardCurrent Atter Crane Company sells its product for $5600 per unit. Variable costs per unit are: manufacturing, $2600, and selling and administrative, $25. Fixed costs are: $18000 manufacturing overhead, and $24000 selling and administrative. There was no beginning inventory at 1/1/18. Production was 20 units per year in 2018-2020. Sales were 20 units in 2018, 16 units in 2019, and 24 units in 2020. Income under variable costing for 2020 is O $21000. O $29400. O $25650. O $25800.arrow_forwardABC Limited started its operation in the year 2013 with a total production capacity of 2,00,000 units. The following information, for two years, are made available to you: 2013 , 2014 Sales (units) 80,000 1,20,000 Total Cost 34,40,000 45,60,000 There has been no change in the cost structure and selling price and it is anticipated that it will remain unchanged in the year 2015 also. Selling price is 40 per unit. Calculate : Variable cost per Profit Volumearrow_forward
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