9-21 Absorption versus variable costing. Company TJM produces and sells one kind of product, named MAX. The selling price of MAX is $10 a piece. In the beginning of the year 2014, the inventory of MAX consists of 1,000 pieces. The budgeted variable manufacturing costs for one unit MAX are $3 and the budgeted fixed manufacturing costs $4. For the end of 2014, the following is budgeted concerning the product MAX: Production: 10,000 units ■ Total fixed manufacturing costs: $40,000. • Total fixed selling and administrative costs $18,000. ■ Total variable selling and administrative costs $12,200. At the end of the year 2014, there will be no ending inventory of product MAX. The owner of TJM is confused about the calculation of the product costs. He doubts whether he should consider the selling and administrative costs as product or period costs. He wants your advice. 1. Calculate the cost per unit of MAX according to absorption costing. 2. Calculate the cost per unit of MAX according to variable costing. 3. Prepare the income statement for 2014 according to absorption costing. 4. Prepare the income statement for 2014 according to variable costing. 5. Explain the difference between questions 3 and 4. Required

9-21 Absorption versus variable costing. Company TJM produces and sells one kind of product, named MAX. The selling price of MAX is $10 a piece. In the beginning of the year 2014, the inventory of MAX consists of 1,000 pieces. The budgeted variable manufacturing costs for one unit MAX are $3 and the budgeted fixed manufacturing costs $4. For the end of 2014, the following is budgeted concerning the product MAX: Production: 10,000 units ■ Total fixed manufacturing costs: $40,000. • Total fixed selling and administrative costs $18,000. ■ Total variable selling and administrative costs $12,200. At the end of the year 2014, there will be no ending inventory of product MAX. The owner of TJM is confused about the calculation of the product costs. He doubts whether he should consider the selling and administrative costs as product or period costs. He wants your advice. 1. Calculate the cost per unit of MAX according to absorption costing. 2. Calculate the cost per unit of MAX according to variable costing. 3. Prepare the income statement for 2014 according to absorption costing. 4. Prepare the income statement for 2014 according to variable costing. 5. Explain the difference between questions 3 and 4. Required

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Prepare a flexible budget for the three sales levels under consideration. Waterway manufactures aluminum canoes. In planning for the coming year, CFO Alexis King is considering three different sales targets: 2,900 canoes, 3,340 canoes, and 3,550 canoes. Canoes sell for $990 each. The standard variable cost information for a canoe is as follows. Direct materials $ 297 Direct labor 112 Variable overhead Utilities 35 Indirect material 30 Indirect labor 60 Total $ 534 Annual fixed overhead cost is expected to be: Maintenance $ 20,600 Depreciation 43,500 Insurance 29,500 Rent 33,690 Total $ 127,290
1. Schuh Corporation manufactures product AB1 which requires a raw material called X2. In order to make one unit of AB1, 2.5 kgs of raw materials are used. Budgeted production of AB1 for the first 5 months are as follows : January. . 28,000 units February . .27,500 units March. 28,000 units April.. .29,500 units May.. ..27,000 units The company wants to maintain an ending inventory equal to 30% of the following months raw material needs for production. Raw material costs $10 per unit. Schuh Corporation now wants to make a Direct Material Budget. What should be the dollar value of the ending inventory for the month of February, on the direct material budget?
Calculate the total factory overhead rate per unit using direct labor hours as allocation base. The flexible budget coco corp. in different levels of direct labor hours. Direct labor hours 20,0000 30,000 40,000 Variable FOH 40,0000 60,000 80,000 Fixed FOH 10,0000 10,000 10,000 Each product needs 5 direct labor hours and the company expects to produce 2,000 units in 2021. Calculate the total factory overhead rate per unit using units of production as allocation base.
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Required information Eckert Company uses the absorption costing approach to cost plus pricing to set prices for its products. Based on budgeted sales of 18.000 units next year, the unit product cost of a particular product is $60.40. The company's selling general, and administrative expenses for this product are budgeted to be $370.800 in total for the year. The company has invested $260.000 in this product and expects a return on investment of T (Appendix 12A) The markup on absorption cost for this product would be closest to which of the following O O O M4T 36.74 ALIK HON 3 Save & Submit
10. XYZ Corp operates under system of standard Costing within a single cost centre. The standard cost details are as follows: Direct material – 5kg @ $4.2 Direct labor - 3 hours @ $3 Factory overhead - $1.2 per labor hour. The budgeted production schedule for the month of May,2019 was 40,000 units. However, 40,960 units were completed during the month. No opening or closing Work-in-progress. Purchases during the month were 225,000 kg of material @ $4.5 per kg. Actual Production and Sales record for the month: Materials used 205,600 kgs Direct Labor Cost (121,200 hrs) $ 387,840 Factory Overhead Cost $ 100,000 Sales 40,000 units. Selling Price shall have a mark-up of 20% on selling price. 1. Calculated material variance. 2. Calculated Labor Variances. 3. Calculated Factory overhead Variance. 4. Prepare Income Statement for May 2019 showing actual Gross Margin.
A company's flexible budget for 15,000 units of production showed per unit contribution margin of $4.10 and fixed costs, $25,000. The income expecte if the company produces and sells 18,000 units is: "Multiple Choice $73,800. $36,500 $8,000 O $25,000 $48,800 6
vercise 2-Flexible budget and overhead rates: Babyl Company expects a normat capacity of 20,000 direct labor hours for March 2017. The over- head costs under this normal capacity are as follows: Fixed costs ID 1,000,000 ID 800,000 ID 2,200,000 ID 3,000,000 ID 400,000 Variable costs ID 100 per Indirect labor Other costs ID 50 per DLH Maintenance ID 120 per DLH Depreciation Supplies ID 20 per DLH Required: 1-Prepare flexible budget for levels of activity from 18,000 to 24,000 direct labor hours in increments of 2,000 direct labor hours. 2- Calculate standard overhead rates.
Fixed costs in total: Manufacturing $100,000 (Budgeted or planned and actual) Selling & Admin $ 75,000 Variable costs per unit: Manufacturing $ 11 Selling & Admin. $ 2 There were 5,000 units in inventory January 1, 2011. During the year 25,000 units were produced and 28,000 units were sold. Planned or budgeted production was 20,000 units. Under variable costing, the product cost of one unit would be: Assume that the operating income under variable costing is $28,000. What is the operating income under absorption costing? (You do not need to prepare an income statement to answer this question and the Price per unit is not given.) The Production Volume Variance (PVV) variance is: Should the PVV be ‘added’ or ‘subtracted’ from COGS to make the adjustment?