Absorption and Variable Costing Comparisons: Sales Exceed Production Wright Development purchases, develops, and sells commercial building sites. As the sites are sold, they are cleared at an average cost of $8,000 per site. Storm drains and driveways are also installed at an average cost of $10,000 per site. Selling costs are 6% of sales price. Administrative costs are $600,000 per year. Two years ago, the company bought 2,000 acres of land for $7,500,000 and divided it into 200 sites of equal size. During that year, 95 sites were sold at an average price of $150,000. Last year, the company purchased and developed another 2,000 acres, divided into 200 sites. The purchase price was again $7,500,000. Sales totaled 250 sites last year at an average price of $150,000. Required a. Prepare functional income statements using absorption costing for each of the two years. Use a negative sign only to indicate a net loss for income. Otherwise, do not use negative signs with your answers. Wright Development Functional (Absorption Costing) Income Statements Comparative (in thousands, except site data) Sales Cost of sales Gross profit Selling and administrative expenses: Net income (loss) Sales Variable costs Contribution margin Fixed expenses Net income (loss) Year 1 Answer Answer Answer Year 1 Answer Answer Answer b. Prepare contribution income statements using variable costing for each of the two years. Use a negative sign only to indicate a net loss for income. Otherwise, do not use negative signs with your answers. Wright Development Contribution Income Statements Comparative (in thousands, except site data) Answer Answer Answer Year 2 Answer Answer Answer Answer Answer Year 2 Answer Answer Answer Answer Answer Answer
Absorption and Variable Costing Comparisons: Sales Exceed Production Wright Development purchases, develops, and sells commercial building sites. As the sites are sold, they are cleared at an average cost of $8,000 per site. Storm drains and driveways are also installed at an average cost of $10,000 per site. Selling costs are 6% of sales price. Administrative costs are $600,000 per year. Two years ago, the company bought 2,000 acres of land for $7,500,000 and divided it into 200 sites of equal size. During that year, 95 sites were sold at an average price of $150,000. Last year, the company purchased and developed another 2,000 acres, divided into 200 sites. The purchase price was again $7,500,000. Sales totaled 250 sites last year at an average price of $150,000. Required a. Prepare functional income statements using absorption costing for each of the two years. Use a negative sign only to indicate a net loss for income. Otherwise, do not use negative signs with your answers. Wright Development Functional (Absorption Costing) Income Statements Comparative (in thousands, except site data) Sales Cost of sales Gross profit Selling and administrative expenses: Net income (loss) Sales Variable costs Contribution margin Fixed expenses Net income (loss) Year 1 Answer Answer Answer Year 1 Answer Answer Answer b. Prepare contribution income statements using variable costing for each of the two years. Use a negative sign only to indicate a net loss for income. Otherwise, do not use negative signs with your answers. Wright Development Contribution Income Statements Comparative (in thousands, except site data) Answer Answer Answer Year 2 Answer Answer Answer Answer Answer Year 2 Answer Answer Answer Answer Answer Answer
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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Transcribed Image Text:Absorption and Variable Costing Comparisons: Sales Exceed Production
Wright Development purchases, develops, and sells commercial building sites. As the sites are sold, they are cleared at an average cost
of $8,000 per site. Storm drains and driveways are also installed at an average cost of $10,000 per site. Selling costs are 6% of sales
price. Administrative costs are $600,000 per year. Two years ago, the company bought 2,000 acres of land for $7,500,000 and divided
it into 200 sites of equal size. During that year, 95 sites were sold at an average price of $150,000. Last year, the company purchased
and developed another 2,000 acres, divided into 200 sites. The purchase price was again $7,500,000. Sales totaled 250 sites last year at
an average price of $150,000.
Required
a. Prepare functional income statements using absorption costing for each of the two years.
Use a negative sign only to indicate a net loss for income. Otherwise, do not use negative signs with your answers.
Wright Development
Functional (Absorption Costing) Income Statements
Comparative
(in thousands, except site data)
Sales
Cost of sales
Gross profit
Selling and administrative expenses:
Net income (loss)
Sales
Variable costs
Contribution margin
Fixed expenses
Net income (loss)
Year 1
Answer
Year 1
Answer
Answer
Answer
b. Prepare contribution income statements using variable costing for each of the two years.
Use a negative sign only to indicate a net loss for income. Otherwise, do not use negative signs with your answers.
Wright Development
Contribution Income Statements
Comparative
(in thousands, except site data)
Answer
Year 2
Answer Answer
Answer
Answer Answer
Answer Answer
Year 2
Answer Answer
Answer
Answer Answer
Answer
Answer
Answer
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