1. For the year ended December 31, 20x2. prepare the revised income statement for San Mateo Optics, Inc., utilizing the variable-costing method. Be sure to include the contribution margin on the revised income statement. Enter all answers as positive amounts.
1. For the year ended December 31, 20x2. prepare the revised income statement for San Mateo Optics, Inc., utilizing the variable-costing method. Be sure to include the contribution margin on the revised income statement. Enter all answers as positive amounts.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
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Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
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Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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Transcribed Image Text:Absorption- and Variable-Costing Income Statements
San Mateo Optics, Inc., specializes in manufacturing lenses for large telescopes and cameras used in space exploration. As the specifications for the lenses are determined by the customer and vary considerably, the company uses a job-order costing system.
Manufacturing overhead is applied to jobs on the basis of direct labor hours, utilizing the absorption- or full-costing method. San Mateo's predetermined overhead rates for 20x1 and 20x2 were based on the following estimates.
20x1
20x2
Direct labor hours
32,500
44,000
Direct labor cost
$325,000 $462,000
Fixed manufacturing overhead
$130,000 $176,000
Variable manufacturing overhead $162,500 $198,000
Jim Cimino, San Mateo's controller, would like to use variable (direct) costing for internal reporting purposes as he believes statements prepared using variable costing are more appropriate for making product decisions. In order to explain the benefits of variable costing to the other members of San Mateo's
management team, Cimino plans to convert the company's income statement from absorption costing to variable costing. He has gathered the following information for this purpose, along with a copy of San Mateo's 20x1 and 20x2 comparative income statement.
San Mateo Optics, Inc.
Comparative Income Statement
For the Years 20x1 and 20x2
20x1
20x2
Net sales
$1,140,000
$1,520,000
Cost of goods sold:
Finished goods at January 1
$ 16,000
$ 25,000
Cost of goods manufactured
720,000
976,000
Total available
$ 736,000
$1,001,000
Less: Finished goods at December 31
25,000
14,000
Unadjusted cost of goods sold
$ 711,000
$ 987,000
Overhead adjustment
12,000
7,000
Cost of goods sold
$ 723,000
$ 994,000
Gross profit
$ 417,000
$ 526,000
Selling expenses
(150,000)
(190,000)
Administrative expenses
(160,000)
(187,000)
Operating income
$ 107,000
$ 149,000
San Mateo's actual manufacturing data for the two years are as follows:
20x1
20x2
Direct labor hours
30,000
42,000
Direct labor cost
$300,000 $435,000
Direct materials used
$140,000 $210,000
Manufacturing overhead $132,000 $175,000
The company's actual inventory balances were as follows:
Transcribed Image Text:December 31, December 31, December 31,
20x0
20x1
20x2
Direct materials
$32,000
$36,000
$18,000
Work in process:
Costs
$44,000
$34,000
$60,000
Direct labor hours
1,800
1,400
2,500
Finished goods:
Costs
$16,000
$25,000
$14,000
Direct labor hours
700
1,080
550
For both years, all administrative expenses were fixed, while a portion of the selling expenses resulting from an 8 percent commission on net sales was variable. San Mateo reports any overor underapplied overhead as an adjustment to the cost of goods sold.
Required:
1. For the year ended December 31, 20x2, prepare the revised income statement for San Mateo Optics, Inc., utilizing the variable-costing method. Be sure to include the contribution margin on the revised income statement. Enter all answers as positive amounts.
San Mateo Optics, Inc.
Variable-Costing Income Statement
For the Year Ended December 31, 20x2
Variable costs:
Total available
Total variable costs
Fixed costs:
Total fixed costs
Finished goods inventory, January 1:
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