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1. Under 100% sales assumption, using absorption coating, the COGS is calculated by adding Dorect Material (DM), Direct Labor (DL), and Fixed Overhead (FOH) a) True b) False 2. Under 100% sales assumption, using absorption costing, the SG&A is calculated by adding Fixed SG&A, variable SG&A, and Fixed Overhead (FOH). a) True b) False 3. Under 75% sales assumption, using absorption costing, the COGS is calculated by adding Direct Material (DM), Direct Labor (DL), variable Overhead (VOH), and Fixed Overhead (FOH) multiply by 75%. a) True b) False

1. Under 100% sales assumption, using absorption coating, the COGS is calculated by adding Dorect Material (DM), Direct Labor (DL), and Fixed Overhead (FOH) a) True b) False 2. Under 100% sales assumption, using absorption costing, the SG&A is calculated by adding Fixed SG&A, variable SG&A, and Fixed Overhead (FOH). a) True b) False 3. Under 75% sales assumption, using absorption costing, the COGS is calculated by adding Direct Material (DM), Direct Labor (DL), variable Overhead (VOH), and Fixed Overhead (FOH) multiply by 75%. a) True b) False

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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1. Under 100% sales assumption, using absorption coating, the COGS is calculated by adding Dorect Material (DM), Direct Labor (DL), and Fixed Overhead (FOH)

a) True

b) False

2. Under 100% sales assumption, using absorption costing, the SG&A is calculated by adding Fixed SG&A, variable SG&A, and Fixed Overhead (FOH).

a) True

b) False

3. Under 75% sales assumption, using absorption costing, the COGS is calculated by adding Direct Material (DM), Direct Labor (DL), variable Overhead (VOH), and Fixed Overhead (FOH) multiply by 75%.

a) True

b) False

XYZ Company anticipates the following costs during the first year of operations. The company is attempting to project profitability if 100% of production is sold, and if 75% of production is sold. Use the pick lists associated with the boxed areas to select amounts for each cost category in the absorption and variable costing income statements that follow. Correct selections will turn the boxed areas green. Afterwards, answer the questions at the bottom of the spreadsheet. Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling, general, and administrative Fixed selling, general, and administrative Sales Absorption v. variable costing.xlsx Assumption >>>> Less: SG&A Less: Cost of goods sold Gross profit Income XYZ Company ABSORPTON COSTING INCOME STATEMENT For the Year Ending December 31, 20XX 75% Sold Sales Assumption >>>> Less: Variable product cost Variable manufacturing margin Income Less: Variable SG&A Contribution margin Less: Fixed expenses 450,000 XYZ Company VARIABLE COSTING INCOME STATEMENT For the Year Ending December 31, 20XX 95,000 92,500 75% Sold 450,000 187,500 262,500 262,500 350,000 187,500 250,000 45,000 150,000 150,000 67,500 75,000 25,000 How much is ending inventory if 75% of the production is sold, and: XYZ uses absorption costing? >>>> XYZ uses variable costing? >>>> 100,000 10% of sales 50,000 100% Sold 600,000 110,000 140,000 100% Sold HONDA 60,000 217,500 290,000 600,000 250,000 350,000 150,000 140,000 Notice that income is the same under absorption and variable costing if all production is sold. This is not true when only 75% of production is sold because all of the manufacturing overhead is charged against income under variable costing, but not absorption costing. 87,500 62,500 Notice that the $25,000 difference between ending inventory amounts ($87,500 and $62,500) is equal to the difference in income ($92,500 v. $67,500). This occurs because $25,000 of fixed manufacturing overhead is assigned to inventory under absorption costing but charged against income under variable costing.
Transcribed Image Text:XYZ Company anticipates the following costs during the first year of operations. The company is attempting to project profitability if 100% of production is sold, and if 75% of production is sold. Use the pick lists associated with the boxed areas to select amounts for each cost category in the absorption and variable costing income statements that follow. Correct selections will turn the boxed areas green. Afterwards, answer the questions at the bottom of the spreadsheet. Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling, general, and administrative Fixed selling, general, and administrative Sales Absorption v. variable costing.xlsx Assumption >>>> Less: SG&A Less: Cost of goods sold Gross profit Income XYZ Company ABSORPTON COSTING INCOME STATEMENT For the Year Ending December 31, 20XX 75% Sold Sales Assumption >>>> Less: Variable product cost Variable manufacturing margin Income Less: Variable SG&A Contribution margin Less: Fixed expenses 450,000 XYZ Company VARIABLE COSTING INCOME STATEMENT For the Year Ending December 31, 20XX 95,000 92,500 75% Sold 450,000 187,500 262,500 262,500 350,000 187,500 250,000 45,000 150,000 150,000 67,500 75,000 25,000 How much is ending inventory if 75% of the production is sold, and: XYZ uses absorption costing? >>>> XYZ uses variable costing? >>>> 100,000 10% of sales 50,000 100% Sold 600,000 110,000 140,000 100% Sold HONDA 60,000 217,500 290,000 600,000 250,000 350,000 150,000 140,000 Notice that income is the same under absorption and variable costing if all production is sold. This is not true when only 75% of production is sold because all of the manufacturing overhead is charged against income under variable costing, but not absorption costing. 87,500 62,500 Notice that the $25,000 difference between ending inventory amounts ($87,500 and $62,500) is equal to the difference in income ($92,500 v. $67,500). This occurs because $25,000 of fixed manufacturing overhead is assigned to inventory under absorption costing but charged against income under variable costing.
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