9-40 Absorption, variable, and throughput costing. (LO 3, 4) EnRG Inc. produces trail mix packaged for sale in convenience stores across Canada. At the beginning of April, EnRG has no inventory of trail mix. Demand for the next three months is expected to remain constant at 50,000 bags per month. EnRG plans to produce 50,000 bags in April. However, many of the employees take vacation in June, so EnRG plans to produce 70,000 bags in May and only 30,000 bags in June. Costs for the three months are expected to remain unchanged. The costs and revenues for April, May, and June are expected to be Sales revenue Direct material cost Direct manufacturing labour cost $6.00 per bag $0.80 per bag $0.45 per bag Variable manufacturing overhead cost $0.30 per bag $0.15 per bag $105,000 per month Variable selling cost Fixed manufacturing overhead cost Fixed administrative costs $ 35,000 per month Suppose the actual costs, market demand, and levels of production for April, May, and June are as expected. Required 1. Compute operating income for April, May, and June under variable costing. 2. Compute operating income for April, May, and June under absorption costing. Assume that the denominator level for each month is that month's expected level of output. 3. Compute operating income for April, May, and June under throughput costing. 4. Discuss the benefits and problems associated with using throughput costing.
9-40 Absorption, variable, and throughput costing. (LO 3, 4) EnRG Inc. produces trail mix packaged for sale in convenience stores across Canada. At the beginning of April, EnRG has no inventory of trail mix. Demand for the next three months is expected to remain constant at 50,000 bags per month. EnRG plans to produce 50,000 bags in April. However, many of the employees take vacation in June, so EnRG plans to produce 70,000 bags in May and only 30,000 bags in June. Costs for the three months are expected to remain unchanged. The costs and revenues for April, May, and June are expected to be Sales revenue Direct material cost Direct manufacturing labour cost $6.00 per bag $0.80 per bag $0.45 per bag Variable manufacturing overhead cost $0.30 per bag $0.15 per bag $105,000 per month Variable selling cost Fixed manufacturing overhead cost Fixed administrative costs $ 35,000 per month Suppose the actual costs, market demand, and levels of production for April, May, and June are as expected. Required 1. Compute operating income for April, May, and June under variable costing. 2. Compute operating income for April, May, and June under absorption costing. Assume that the denominator level for each month is that month's expected level of output. 3. Compute operating income for April, May, and June under throughput costing. 4. Discuss the benefits and problems associated with using throughput costing.
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
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Transcribed Image Text:9-40 Absorption, variable, and throughput costing. (LO 3, 4) EnRG Inc.
produces trail mix packaged for sale in convenience stores across Canada. At
the beginning of April, EnRG has no inventory of trail mix. Demand for the
next three months is expected to remain constant at 50,000 bags per month.
EnRG plans to produce 50,000 bags in April. However, many of the employees
take vacation in June, so EnRG plans to produce 70,000 bags in May and only
30,000 bags in June.
Costs for the three months are expected to remain unchanged. The costs and
revenues for April, May, and June are expected to be
Sales revenue
Direct material cost
Direct manufacturing labour cost
$6.00 per bag
$0.80 per bag
$0.45 per bag
Variable manufacturing overhead cost
$0.30 per bag
$0.15 per bag
$105,000 per month
Variable selling cost
Fixed manufacturing overhead cost
Fixed administrative costs
$ 35,000 per month
Suppose the actual costs, market demand, and levels of production for April,
May, and June are as expected.
Required
1. Compute operating income for April, May, and June under variable
costing.
2. Compute operating income for April, May, and June under absorption
costing. Assume that the denominator level for each month is that
month's expected level of output.
3. Compute operating income for April, May, and June under throughput
costing.
4. Discuss the benefits and problems associated with using throughput
costing.
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