COST ACCOUNTING TTU >IC<
17th Edition
ISBN: 9781323409046
Author: Horngren
Publisher: PEARSON
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Chapter 9, Problem 9.40P
Variable and absorption costing and breakeven points. LLAP Company manufactures a specialized hoverboard. LLAP began 2017 with an inventory of 240 hoverboards. During the year, it produced 1,200 boards and sold 1,300 for $800 each. Fixed production costs were $319,000, and variable production costs were $375 per unit. Fixed advertising, marketing, and other general and administrative expenses were $150,000, and variable shipping costs were $20 per board. Assume that the cost of each unit in beginning inventory is equal to 2017 inventory cost.
- 1. Prepare an income statement assuming LLAP uses variable costing.
Required
- 2. Prepare an income statement assuming LLAP uses absorption costing. LLAP uses a denominator level of 1,100 units. Production-volume variances are written off to cost of goods sold.
- 3. Compute the breakeven point in units sold assuming LLAP uses the following:
- a. Variable costing
- b. Absorption costing (Production = 1, 200 boards)
- 4. Provide proof of your preceding breakeven calculations.
- 5. Assume that $44,000 of fixed administrative costs were reclassified as fixed production costs. Would this reclassification affect the breakeven point using variable costing? What if absorption costing were used? Explain.
- 6. The company that supplies LLAP with its specialized impact-resistant material has announced a price increase of $20 for each board. What effect would this have on the breakeven points previously calculated in requirement 3?
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Variable and absorption costing and breakeven points. LLAP Company manufactures a specialized hoverboard. LLAP began 2017 with an inventory of 240 hoverboards. During the year, it produced 1,200 boards and sold 1,300 for $800 each. Fixed production costs were $319,000, and variable production costs were $375 per unit. Fixed advertising, marketing, and other general and administrative expenses were $150,000, and variable shipping costs were $20 per board. Assume that the cost of each unit in beginning inventory is equal to 2017 inventory cost.
The Robinson Lawn Chair Company produces and sells a single high-priced lawn chair and in fiscal 2016 the company produced and sold 30,000 units. The 2016 income statement of the company reported the following:
Sales $1,800,000
Variable Costs $1,350,000
Fixed Costs $240,000
Income before Taxes $210,000
(a) Compute the contribution margin per unit.
(b) How many units must be sold to break even?
(c) Compute the new breakeven point if the price of unit is increased to $65 and additional $102,000 per year will be paid for advertising.
(d) Assuming a tax rate of 25%, how many units must be sold to gain an after tax profit of $200,000
Johnson Marine has the following costs and expected sales for the coming year. Johnson is considering a number of different methods to determine the price of its product.
Total Costs
Variable Manufacturing
$
2,357,500
Variable Selling and Administrative
757,500
Plant-level Fixed Overhead
1,215,000
Fixed Selling and Administrative
607,500
Batch-level Fixed Overhead
207,500
Total Investment in Product Line
10,022,500
Expected Sales (units)
21,500
If Johnson determines price using a 48% markup of full manufacturing cost, the price is:
Chapter 9 Solutions
COST ACCOUNTING TTU >IC<
Ch. 9 - Differences in operating income between variable...Ch. 9 - Why is the term direct costing a misnomer?Ch. 9 - Do companies in either the service sector or the...Ch. 9 - Explain the main conceptual issue under variable...Ch. 9 - Companies that make no variable-cost/fixed-cost...Ch. 9 - The main trouble with variable costing is that it...Ch. 9 - Give an example of how, under absorption costing,...Ch. 9 - What are the factors that affect the breakeven...Ch. 9 - Critics of absorption costing have increasingly...Ch. 9 - What are two ways of reducing the negative aspects...
Ch. 9 - Prob. 9.11QCh. 9 - Describe the downward demand spiral and its...Ch. 9 - Will the financial statements of a company always...Ch. 9 - Prob. 9.14QCh. 9 - The difference between practical capacity and...Ch. 9 - In comparing the absorption and variable cost...Ch. 9 - Queen Sales, Inc. has just completed its first...Ch. 9 - King Tooling has produced and sold the following...Ch. 9 - The following information relates to Drexler Inc.s...Ch. 9 - Prob. 9.20MCQCh. 9 - Variable and absorption costing, explaining...Ch. 9 - Throughput costing (continuation of 9-21). The...Ch. 9 - Variable and absorption costing, explaining...Ch. 9 - Throughput costing (continuation of 9-23). The...Ch. 9 - Variable versus absorption costing. The Tomlinson...Ch. 9 - Absorption and variable costing. (CMA) Miami,...Ch. 9 - Absorption versus variable costing. Horace Company...Ch. 9 - Candyland uses standard costing to produce a...Ch. 9 - Capacity management, denominator-level capacity...Ch. 9 - Denominator-level problem. Thunder Bolt Inc., is a...Ch. 9 - Variable and absorption costing and breakeven...Ch. 9 - Variable costing versus absorption costing. The...Ch. 9 - Throughput Costing (continuation of 9-32) 1....Ch. 9 - Variable costing and absorption costing, the Z-Var...Ch. 9 - Comparison of variable costing and absorption...Ch. 9 - Effects of differing production levels on...Ch. 9 - Alternative denominator-level capacity concepts,...Ch. 9 - Motivational considerations in denominator-level...Ch. 9 - Denominator-level choices, changes in inventory...Ch. 9 - Variable and absorption costing and breakeven...Ch. 9 - Downward demand spiral. Market.com is about to...Ch. 9 - Absorption costing and production-volume...Ch. 9 - Operating income effects of denominator-level...Ch. 9 - Variable and absorption costing, actual costing....Ch. 9 - Prob. 9.45PCh. 9 - Cost allocation, responsibility accounting, ethics...Ch. 9 - Absorption, variable, and throughput costing....Ch. 9 - Costing methods and variances, comprehensive. Rob...
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