If your formulas are correct, you should get the correct answers to the following questions.(a) What is the net operating income (loss) in Year 1 under absorption costing?(b) What is the net operating income (loss) in Year 2 under absorption costing?(c) What is the net operating income (loss) in Year 1 under variable costing?(d) What is the net operating income (loss) in Year 2 under variable costing?(e) The net operating income (loss) under absorption costing is less than the net operating income (loss) under variable costing in Year2 because: (You may select more than one answer. Single click the box with the question mark to produce a check mark for a? Units were left over from the previous year.The cost of goods sold is always less under variable costing than under absorption costing.Sales exceeded production so some of the fixed manufacturing overhead of the perlod was released from inventories under absorptioncosting.3.Make a note of the absorption costing net operating income (loss) in Year 2At the end of Year 1, the company's board of directors set a target for Year 2 of net operating income of $130,000 under absorptioncosting. If this target is met, a hefty bonus would be paid to the CEO of the company. Keeping everything else the same from part (2)above, change the units produced in Year 2 to 4,000 units.(a) Would this change result in a bonus being paid to the CEO?O YesO No(b) What is the net operating income (loss) in Year 2 under absorption costing?(c) Would this doubling of production in Year 2 be in the best interests of the company if sales are expected to continue to be 2,100units per year?O YesO No A1fxChapter 6: ApBDEChapter 6: Applying Excel3 Data4 Selling price per unit5 Manufacturing costs:6 Variable per unit produced:Direct materials$507$118Direct labor$6$3Variable manufacturing overhead10 Fixed manufacturing overhead per year11 Selling and administrative expenses:12 Variable per unit sold13 Fixed per year9$120.000$4S70,0001415Year 1Year 216 Units in beginning inventory17 Units produced during the year18 Units sold during the year10,0006.0008,0006,0001920 Enter a formula into each of the cells marked with a ? below21 Review Problem 1: Contrasting Variable and Absorption Costing2223 Compute the Ending inventory24Year 1Year 225 Units in beginning inventory26 Units produced during the year27 Units sold during the year28 Units in ending inventory2,0006,0006,00010,0008.0002,0002,0002930 Compute the Absorption Costing Unit Product CostYear 1$1131Year 2$1132 Direct materials33 Direct labor34 Variable manufacturing overhead35 Fixed manufacturing overhead36 Absorption costing unit product cost6331220$32$403738 Construct the Absorption Costing Income Statement39Year 1Year 240 Sales$ 400,000 S 300,00041 Cost of goods sold42 Gross margin43 Selling and administrative expenses44 Net operating income256,000240,000144,000102.000$ 42,000 $ (34,000)60,00094.0004546 Compute the Variable Costing Unit Product CostYear 1Year 2$114748 Direct materials$11649 Direct labor6.50 Variable manufacturing overhead51 Variable costing unit product cost3$203$205253 Construct the Variable Costing income Statement54Year 1Year 2$ 400,000$ 300,00055 Sales56 Variable expenses57 Variable cost of goods sold58 Variable selling and administrative expenses59 Contribution margin60 Fixed expenses61 Fixed manufacturing overhead62 Fixed selling and administrative expenses63 Net operating income$ 160,000192,000208,000$120,00024,000$144,000156,00032,000$120,000S70,000 $190,000$ 18.000$120,000$70,000$190,000S (34.000)2. Change all of the numbers in the data area of your worksheet so that it looks like this:ABChapter 6: Applying Excel23Data4 Selling price per unit5 Manufacturing costs:3526Variable per unit produced:7Direct materials1518Direct labor539Variable manufacturing overhead2410Fixed manufacturing overhead per year96,00011 Selling and administrative expenses:12Variable per unit sold813Fixed per year57,0001415Year 1Year 216 Units in beginning inventory17 Units produced during the year2,4002,00018 Units sold during the year2,1002,100

Absorption costing is defined as the costing method which account for all the manufacturing costs…

Answered: (a) What is the net operating income…

(a) What is the net operating income (loss) in Year 1 under absorption costing? (b) What is the net operating income (loss) in Year 2 under absorption costing?

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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