8. Under 75% sales assumption, using variable costing, the variable product cost balance can be calculated by:(150,000 + 75.000+ 25,000) x 25%a) Trueb) False9. Under 75% sales assumption, using variable costing, the contribution margin balance can be calculated by:Less: (150,000 + 75.000+ 25,000) x 75% Less: 450,000 x 10%a) Trueb) False10. Under Variable Costing, if a company produces more and sales less: The Net income is LESS, and the End Inventory is LESS:a) Trueb) False XYZ Company anticipates the following costs during the first year ofoperations. The company is attempting to project profitability if 100% ofproduction is sold, and if 75% of production is sold. Use the pick listsassociated with the boxed areas to select amounts for each cost category in theabsorption and variable costing income statements that follow. Correctselections will turn the boxed areas green. Afterwards, answer the questions atthe bottom of the spreadsheet.Direct laborDirect materialsVariable manufacturing overheadFixed manufacturing overheadVariable selling, general, and administrativeFixed selling, general, and administrativeSales7:05Absorption v. variable costing.xlsxAssumption >>>>Less: SG&AIncomeLess: Cost of goods soldGross profitSalesXYZ CompanyABSORPTON COSTING INCOME STATEMENTFor the Year Ending December 31, 20XX75% SoldAssumption >>>>IncomeLess: Variable product costVariable manufacturing marginLess: Variable SG&AContribution marginLess: Fixed expenses450,000262,500187,500XYZ CompanyVARIABLE COSTING INCOME STATEMENTFor the Year Ending December 31, 20XX75% Sold95,00092,500450,000187,500262,50045,000217,5000 250,000110,000150,00067,500150,000How much is ending inventory if 75% of the production is sold, and:XYZ uses absorption costing? >>>>XYZ uses variable costing? >>>>75,00025,000100,00010% of sales50,000100% Sold600,000350,000140,000100% Sold600,000250,000350,00060,000290,000150,000140,000Notice that income is the same under absorption and variable costing if all production is sold. This isnot true when only 75% of production is sold because all of the manufacturing overhead is chargedagainst income under variable costing, but not absorption costing.87,50062,500Notice that the $25,000 difference between ending inventory amounts ($87,500 and $62,500) is equalto the difference in income ($92,500 v. $67,500). This occurs because $25,000 of fixedmanufacturing overhead is assigned to inventory under absorption costing but charged against incomeunder variable costing.80Done

The variable costing method computes the product cost or inventoriable cost at the variable…

8. Under 75% sales assumption, using variable costing, the variable product cost balance can be calculated by: (150,000 + 75.000+ 25,000) x 25% a) True b) False 9. Under 75% sales assumption, using variable costing, the contribution margin balance can be calculated by: Less: (150,000 + 75.000+ 25,000) x 75% Less: 450,000 x 10% a) True b) False 10. Under Variable Costing, if a company produces more and sales less: The Net income is LESS, and the End Inventory is LESS: a) True b) False

8. Under 75% sales assumption, using variable costing, the variable product cost balance can be calculated by: (150,000 + 75.000+ 25,000) x 25% a) True b) False 9. Under 75% sales assumption, using variable costing, the contribution margin balance can be calculated by: Less: (150,000 + 75.000+ 25,000) x 75% Less: 450,000 x 10% a) True b) False 10. Under Variable Costing, if a company produces more and sales less: The Net income is LESS, and the End Inventory is LESS: a) True b) False

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

8. Under 75% sales assumption, using variable costing, the variable product cost balance can be calculated by:
(150,000 + 75.000+ 25,000) x 25%
a) True

b) False

9. Under 75% sales assumption, using variable costing, the contribution margin balance can be calculated by:
Less: (150,000 + 75.000+ 25,000) x 75% Less: 450,000 x 10%
a) True

b) False

10. Under Variable Costing, if a company produces more and sales less: The Net income is LESS, and the End Inventory is LESS:
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 labor
Direct materials
Variable manufacturing overhead
Fixed manufacturing overhead
Variable selling, general, and administrative
Fixed selling, general, and administrative
Sales
7:05
Absorption v. variable costing.xlsx
Assumption >>>>
Less: SG&A
Income
Less: Cost of goods sold
Gross profit
Sales
XYZ Company
ABSORPTON COSTING INCOME STATEMENT
For the Year Ending December 31, 20XX
75% Sold
Assumption >>>>
Income
Less: Variable product cost
Variable manufacturing margin
Less: Variable SG&A
Contribution margin
Less: Fixed expenses
450,000
262,500
187,500
XYZ Company
VARIABLE COSTING INCOME STATEMENT
For the Year Ending December 31, 20XX
75% Sold
95,000
92,500
450,000
187,500
262,500
45,000
217,500
0 250,000
110,000
150,000
67,500
150,000
How much is ending inventory if 75% of the production is sold, and:
XYZ uses absorption costing? >>>>
XYZ uses variable costing? >>>>
75,000
25,000
100,000
10% of sales
50,000
100% Sold
600,000
350,000
140,000
100% Sold
600,000
250,000
350,000
60,000
290,000
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.
80
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