9-27 Absorption and variable costing. The textile company Asten consists of two departments, the weaving department and the sales department. The normal capacity utilization of the weaving department is 100,000 machine hours, and the fixed costs are $1,200,000 per year. For the sales department, the following numbers are calculated: normal capacity utilization of 500,000 meters a year with $500,000 fixed annual costs. Asten produces and sells two products: Deco and Lustra. The following basic information is given: Raw material Other variable costs of weaving dept Number of machine hours per meter, Weaving dept Variable costs sales dept per meter Deco Lustra 2 kg at $5= $10 3 kg at $5 - $15 $8 $10 1/5 $0.60 1/5 $0.60 The two products can be made on the same weaving machines, but not at the same time. 1. Calculate the manufacturing costs and the total costs per meter for both Deco and Lustra. Actual results for 2014: ■ Production: 200,000 meters of Deco and 310,000 meters of Lustra ■ Sales: 190,000 meters of Deco and 300,000 meters of Lustra ▪ Sales price per meter: Deco $23, Lustra $30.60 . Fixed costs: weaving department, $1,250,000; sales department, $500,000 . There are no price and quantity variances on variable costs. CHAPTER 9 INVENTORY COSTING AND CAPACITY ANALYSIS 2. Calculate the variable costing profit. 3. Calculate the absorption costing profit. Required
9-27 Absorption and variable costing. The textile company Asten consists of two departments, the weaving department and the sales department. The normal capacity utilization of the weaving department is 100,000 machine hours, and the fixed costs are $1,200,000 per year. For the sales department, the following numbers are calculated: normal capacity utilization of 500,000 meters a year with $500,000 fixed annual costs. Asten produces and sells two products: Deco and Lustra. The following basic information is given: Raw material Other variable costs of weaving dept Number of machine hours per meter, Weaving dept Variable costs sales dept per meter Deco Lustra 2 kg at $5= $10 3 kg at $5 - $15 $8 $10 1/5 $0.60 1/5 $0.60 The two products can be made on the same weaving machines, but not at the same time. 1. Calculate the manufacturing costs and the total costs per meter for both Deco and Lustra. Actual results for 2014: ■ Production: 200,000 meters of Deco and 310,000 meters of Lustra ■ Sales: 190,000 meters of Deco and 300,000 meters of Lustra ▪ Sales price per meter: Deco $23, Lustra $30.60 . Fixed costs: weaving department, $1,250,000; sales department, $500,000 . There are no price and quantity variances on variable costs. CHAPTER 9 INVENTORY COSTING AND CAPACITY ANALYSIS 2. Calculate the variable costing profit. 3. Calculate the absorption costing profit. Required
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Transcribed Image Text:9-27 Absorption and variable costing. The textile company Asten consists of two departments, the
weaving department and the sales department. The normal capacity utilization of the weaving department
is 100,000 machine hours, and the fixed costs are $1,200,000 per year. For the sales department, the
following numbers are calculated: normal capacity utilization of 500,000 meters a year with $500,000 fixed
annual costs. Asten produces and sells two products: Deco and Lustra.
The following basic information is given:
Raw material
Other variable costs of weaving dept
Number of machine hours per meter,
Weaving dept
Variable costs sales dept per meter
Deco
2 kg at $5= $10
$8
1/5
$0.60
Lustra
3 kg at $5= $15
$10
■ Sales: 190,000 meters of Deco and 300,000 meters of Lustra
■
Sales price per meter: Deco $23, Lustra $30.60
The two products can be made on the same weaving machines, but not at the same time.
1. Calculate the manufacturing costs and the total costs per meter for both Deco and Lustra.
Actual results for 2014:
■ Production: 200,000 meters of Deco and 310,000 meters of Lustra
Fixed costs: weaving department, $1,250,000; sales department, $500,000
■ There are no price and quantity variances on variable costs.
1/5
$0.60
CHAPTER 9 INVENTORY COSTING AND CAPACITY ANALYSIS
2. Calculate the variable costing profit.
3. Calculate the absorption costing profit.
4. Explain the difference between 2 and 3.
Required
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