ABC Ltd makes one product, with the following costs: variable direct materials £9 per unit,variable direct labour £6 per unit, fixed overheads £90,000 per year. During the last year thecompany made 7,500 units and sold 10,000 units for £25 each. There were 2,500 finishedunits in inventory at the start of the year. The costs for the previous year were the same asabove, and have been used to value the opening inventory. 7, 500 units were made last year. a) Prepare the statements of profit or loss under absorption costing and marginal costing.

The income statement is prepared to record the revenue and expenses for the current period. The…

Answered: ABC Ltd makes one product, with the…

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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During its first year of operations, the McCormick Company incurred the following manufacturing costs: Direct materials, $4 per unit, Direct labor, $2 per unit, Variable overhead, $3 per unit, and Fixed overhead, $256,000. The company produced 32,000 units, and sold 26,500 units, leaving 5,500 units in inventory at year-end. What is the value of ending inventory under absorption costing? Multiple Choice $44,000 $49,500 $93,500 $256,000 $305,500
Walsh Company manufactures and sells one product. The following information pertains to each of the company's first two years of operations: Variable costs per unit: Manufacturing: Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative. Fixed costs per year: Fixed manufacturing overhead Fixed selling and administrative expenses $ 30 $ 14 $ 3 $ 2 $ 320,000 $ 80,000 During its first year of operations, Walsh produced 50,000 units and sold 40,000 units. During its second year of operations, it produced 40,000 units and sold 50,000 units. The selling price of the company's product is $57 per unit. Required: 1. Assume the company uses variable costing: a. Compute the unit product cost for Year 1 and Year 2. b. Prepare an income statement for Year 1 and Year 2. 2. Assume the company uses absorption costing: a. Compute the unit product cost for Year 1 and Year 2. b. Prepare an income statement for Year 1 and Year 2. 3. Reconcile the difference…
Lynch Company manufactures and sells a single product. The following costs were incurred during the company's first year of operations: Variable costs per unit: Manufacturing: Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative Fixed costs per year: Fixed manufacturing overhead Fixed selling and administrative $ 11 $ 4 $ 1 $ 1 $ 308,000 $ 218,000 During the year, the company produced 28,000 units and sold 24,000 units. The selling price of the company's product is $41 per unit. Required: 1. Assume the company uses absorption costing: a. Compute the unit product cost. b. Prepare an income statement for the year. 2. Assume the company uses variable costing: a. Compute the unit product cost. b. Prepare an income statement for the year.
Ogilvy Company manufactures and sells one product. The following information pertains to each of the company’s first three years of operations: Variable cost per unit: Direct materials $ 18 Fixed costs per year: Direct labor $ 682,000 Fixed manufacturing overhead $ 824,000 Fixed selling and administrative expenses $ 220,000 The company does not incur any variable manufacturing overhead costs or variable selling and administrative expenses. During its first year of operations, Ogilvy produced 62,000 units and sold 62,000 units. During its second year of operations, it produced 62,000 units and sold 59,800 units. In its third year, Ogilvy produced 62,000 units and sold 64,200 units. The selling price of the company’s product is $46 per unit. Assume the company uses super-variable costing: Compute the unit product cost for Year 1, Year 2, and Year 3. Prepare an income statement for Year 1, Year 2, and Year 3.
ABC Pty Ltd purchases and uses 5 000 units of a component per month in production. The fixed cost per order of the component is R 300 and the carrying cost per unit per annum is R 75. The time taken between placing the order and receiving the order from the supplier is 15 days while the company’s target safety inventory is three times that of the supplier’s delivery days. 365 days in year. The company makes use of EOQ method. Calculate the EOQ. (4) Calculate the total annual ordering cost for the company (3) Calculate the reorder point. (3) Calculate the total annual carrying cost for the company. (5) Total (15)
During the year, ABS Corporation produced 500 units of new products. The new product’s variable and fixed manufacturing ocst per unit were P5 and P 3, respectively. At the end of the period, the new product’s inventory consisted of 80 units. What would be the change in the peso amount of inventory at the end of the period if absorption costing were used instead of variable costing?
Whitman Company has just completed its first year of operations. The company's absorption costing income statement for the year follows: Whitman Company Income Statement Sales (40,000 units x $44.60 per unit) Cost of goods sold (40,000 units x $22 per unit) Gross margin Selling and administrative expenses Net operating income $ 1,784,000 880,000 904,000 460,000 $ 444,000 The company's selling and administrative expenses consist of $300,000 per year in fixed expenses and $4 per unit sold in variable expenses. The $22 unit product cost given above is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($180,000 + 45,000 units) Absorption costing unit product cost Required: $ 10 5 3 4 $ 22 1. Redo the company's income statement in the contribution format using variable costing. 2. Reconcile any difference between the net operating income on your variable costing income statement and the net operating income on the absorption…
The normal capacity of an entity is 350 000 units per annum. The raw material cost is R220 per unit and direct labour is R250 per unit. 9. Variable production overheads are R60 per unit and fixed production overheads incurred amounts to R5 250 000. The closing balance of finished goods is 9 500 units (assume there is no opening balance). Which amount is the correct cost of sales figure if the actual production was 280 000 units for the year? 1. R145 000 000 2. R146 500 000 3. R147 422 500 4. R148 472 500
Markson Company had the following results of operations for the past year: Contribution margin income statement Per Unit Annual Total Sales (9,000 units) $ 20.00 $ 180,000 Variable costs Direct materials 4.25 38,250 Direct labor 6.00 54,000 Overhead 2.00 18,000 Contribution margin 7.75 69,750 Fixed costs Fixed overhead 4.25 38,250 Income $ 3.50 $ 31,500 A foreign company offers to buy 2,500 units at $14 per unit. In addition to variable manufacturing and administrative costs, selling these units would increase fixed overhead by $2,000 for the purchase of special tools. Markson’s annual productive capacity is 13,500 units. If Markson accepts this additional business, its profits will:

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