alters ads

Tuesday, 22 October 2013

Linden Company manufactures and sells a single product. Cost data for the product follow: Variable costs per unit: Direct materials $6 Direct labor 12 Variable factory overhead 4 Variable selling and administrative 3 Total variable costs per unit $25 Fixed costs per month: Fixed manufacturing overhead $ 240,000 Fixed selling and administrative 180,000 Total fixed cost per month $ 420,000 The product sells for $40 per unit. Production and sales data for May and June, the first two months of operations, are as follows: Units Produced Units Sold May 30,000 26,000 June 30,000 34,000 Income statements prepared by the accounting department, using absorption costing, are presented below: May June Sales $ 1,040,000 $ 1,360,000 Cost of goods sold 780,000 1,020,000 Gross margin 260,000 340,000 Selling and administrative expenses 258,000 282,000 Net operating income $ 2,000 $ 58,000 Required: 1. Determine the unit product cost under absorption costing and variable costing. Unit Product Cost Absorption costing Variable costing 2. Prepare contribution format variable costing income statements for May and June. (Input all amounts as positive values except losses which should be indicated by a minus sign. Omit the "$" sign in your response.) Variable Costing Income Statement May June Sales $ $ Variable expenses: Variable cost of goods sold Variable selling and administrative expenses Total variable expenses Contribution margin Fixed expenses: Fixed manufacturing overhead Fixed selling and administrative expenses Total fixed expenses Net operating income (loss) $ $ 3. Reconcile the variable costing and absorption costing net operating incomes. (Loss amounts and amounts to be deducted should be indicated with a minus sign. Omit the "$" sign in your response.) Reconciliation of Variable Costing and Absorption Costing Net Operating Incomes May June Variable costing net operating income (loss) $ $ Add (deduct) fixed manufacturing overhead deferred in (released from) inventory under absorption costing Absorption costing net operating income (loss) $ $ Explanation: 1. Absorption Costing Variable Costing Direct materials $ 6 $ 6 Direct labor 12 12 Variable manufacturing overhead 4 4 Fixed manufacturing overhead ($240,000 ÷ 30,000 units) 8 - Unit product cost $ 30 $ 22 2. May June Variable cost of goods sold @ $22 per unit $ 572,000 $ 748,000 Variable selling and administrative expenses @ $3 per unit $ 78,000 $ 102,000 3. Fixed manufacturing overhead cost deferred in inventory under absorption costing (4,000 units × $8 per unit) = $32,000 Fixed manufacturing overhead cost released from inventory under absorption costing (4,000 units × $8 per unit) = $(32,000)

Linden Company manufactures and sells a single product. Cost data for the product follow:

     
  Variable costs per unit:    
      Direct materials   $6    
      Direct labor   12    
      Variable factory overhead   4    
      Variable selling and administrative   3    
   
  Total variable costs per unit   $25    
   

  Fixed costs per month:    
      Fixed manufacturing overhead $ 240,000    
      Fixed selling and administrative   180,000    
 

  Total fixed cost per month $ 420,000    
 





    The product sells for $40 per unit. Production and sales data for May and June, the first two months of operations, are as follows:

  Units
Produced
Units
Sold
  May 30,000      26,000     
  June 30,000      34,000     


    Income statements prepared by the accounting department, using absorption costing, are presented below:

  May June
  Sales $ 1,040,000     $ 1,360,000   
  Cost of goods sold   780,000       1,020,000   
 



  Gross margin   260,000       340,000   
  Selling and administrative expenses   258,000       282,000   
 



  Net operating income $ 2,000     $ 58,000   
 









Required:
1. Determine the unit product cost under absorption costing and variable costing.

       Unit Product Cost
  Absorption costing       
  Variable costing       


2.

Prepare contribution format variable costing income statements for May and June. (Input all amounts as positive values except losses which should be indicated by a minus sign. Omit the "$" sign in your response.)

Variable Costing Income Statement
            May           June
  Sales $    $   
 

  Variable expenses:    
       Variable cost of goods sold      
       Variable selling and administrative expenses      
 

  Total variable expenses      
 

  Contribution margin      
 

  Fixed expenses:    
       Fixed manufacturing overhead      
       Fixed selling and administrative expenses      
 

  Total fixed expenses      
 

  Net operating income (loss) $    $   
 





3.
Reconcile the variable costing and absorption costing net operating incomes. (Loss amounts and amounts to be deducted should be indicated with a minus sign. Omit the "$" sign in your response.)

Reconciliation of Variable Costing and Absorption Costing Net Operating Incomes
            May           June
  Variable costing net operating income (loss) $   $  
  Add (deduct) fixed manufacturing overhead deferred in
  (released from) inventory under absorption costing
   
 

  Absorption costing net operating income (loss) $   $  
 






Explanation: 1.
  Absorption Costing Variable
Costing
  Direct materials $ 6          $ 6       
  Direct labor   12            12       
  Variable manufacturing overhead   4            4       
  Fixed manufacturing overhead
  ($240,000 ÷ 30,000 units)
  8            -       
 



  Unit product cost $ 30          $ 22       
 









2.
  May June
  Variable cost of goods sold @ $22 per unit $ 572,000    $ 748,000   
  Variable selling and administrative expenses @ $3 per unit $ 78,000    $ 102,000   


3.
Fixed manufacturing overhead cost deferred in inventory under absorption costing (4,000 units × $8 per unit) = $32,000
 
Fixed manufacturing overhead cost released from inventory under absorption costing (4,000 units × $8 per unit) = $(32,000)

During Denton Company’s first two years of operations, the company reported absorption costing net operating income as follows:

During Denton Company’s first two years of operations, the company reported absorption costing net operating income as follows:

Year 1 Year 2
  Sales (@ $50 per unit) $ 1,000,000     $ 1,500,000    
  Cost of goods sold (@ $34 per unit) 680,000     1,020,000    




  Gross margin 320,000     480,000    
  Selling and administrative expenses* 310,000     340,000    




  Net operating income $ 10,000     $ 140,000    









* $3 per unit variable; $250,000 fixed each year.

The company’s $34 unit product cost is computed as follows:

  Direct materials $ 8   
  Direct labor 10   
  Variable manufacturing overhead 2   
  Fixed manufacturing overhead ($350,000 ÷ 25,000 units) 14   


  Absorption costing unit product cost $ 34   





   
Production and cost data for the two years are given below:

Year 1 Year 2
  Units produced 25,000 25,000
  Units sold 20,000 30,000


Required:
1.
Prepare a variable costing contribution format income statement for each year. (Input all amounts as positive values except losses which should be indicated by a minus sign. Omit the "$" sign in your response.)

Variable Costing Income Statement
              Year 1               Year 2
  Sales $   $  


  Variable expenses:   
       Variable cost of goods sold    
       Variable selling and administrative expenses    


  Total variable expenses    


  Contribution margin    


  Fixed expenses:
       Fixed manufacturing overhead    
       Fixed selling and administrative expenses    


  Total fixed expenses    


  Net operating income (loss) $   $  






2.
Reconcile the absorption costing and variable costing net operating income figures for each year. (Loss amounts and amounts to be deducted should be indicated with a minus sign. Omit the "$" sign in your response.)

Reconciliation of Variable Costing and Absorption Costing Net Operating Incomes
             Year 1              Year 2
  Variable costing net operating income (loss) $   $  
  Add (deduct) fixed manufacturing overhead
  deferred in (released from) inventory under
  absorption costing
   


  Absorption costing net operating income (loss) $   $  







Explanation:

Wiengot Antennas, Inc., produces and sells a unique type of TV antenna. The company has just opened a new plant to manufacture the antenna, and the following cost and revenue data have been provided for the first month of the plant’s operation.

Wiengot Antennas, Inc., produces and sells a unique type of TV antenna. The company has just opened a new plant to manufacture the antenna, and the following cost and revenue data have been provided for the first month of the plant’s operation.

  Beginning inventory 0   
  Units produced 40,000   
  Units sold 35,000   
  Selling price per unit $60   
  Selling and administrative expenses:
    Variable per unit $2   
    Fixed (total) $ 560,000   
  Manufacturing costs
    Direct materials cost per unit $15   
    Direct labor cost per unit $7   
    Variable manufacturing overhead cost per unit $2   
    Fixed manufacturing overhead cost (total) $ 640,000   


    Because the new antenna is unique in design, management is anxious to see how profitable it will be and has asked that an income statement be prepared for the month.
   
Required:
1. Assume that the company uses absorption costing.
  
a. Determine the unit product cost. (Omit the "$" sign in your response.)

  Unit product cost $  

b.
Prepare an income statement for the month. (Input all amounts as positive values except losses which should be indicated by a minus sign. Omit the "$" sign in your response.)

Absorption Costing Income Statement
  Sales $  
  Cost of goods sold  

  Gross margin  
  Selling and administrative expenses  

  Net operating income (loss) $  



    
2. Assume that the company uses variable costing.
   
a. Determine the unit product cost. (Omit the "$" sign in your response.)

  Unit product cost $  

b.
Prepare a contribution format income statement for the month. (Input all amounts as positive values except losses which should be indicated by a minus sign. Omit the "$" sign in your response.)
    
Variable Costing Income Statement
  Sales $  
  Variable expenses:
       Variable cost of goods sold $  
       Variable selling and administrative expenses    


  Contribution margin  
  Fixed expenses:
       Fixed manufacturing overhead  
       Fixed selling and administrative expenses    


  Net operating income (loss) $  





Explanation: 1.
a.
The unit product cost under absorption costing is:
 
  Direct materials $ 15   
  Direct labor 7   
  Variable manufacturing overhead 2   
  Fixed manufacturing overhead (640,000 ÷ 40,000 units) 16   


  Absorption costing unit product cost $ 40   






b.
Sales (35,000 units × $60 per unit) = $2,100,000
Cost of goods sold (35,000 units × $40 per unit) = $1,400,000
Selling and administrative expenses (35,000 units × $2 per unit) + $560,000 = $630,000

2.
a.

The unit product cost under variable costing is:
 
  Direct materials $ 15   
  Direct labor 7   
  Variable manufacturing overhead 2   


  Variable costing unit product cost $ 24   






b.

Sales (35,000 units × $60 per unit) = $2,100,000
Variable cost of goods sold (35,000 units × $24 per unit) = $840,000
Variable selling and administrative expense (35,000 units × $2 per unit) = $70,000