Absorption Costing Chandler Company sells its product for $107 per unit. Variable manufacturing costs per unit are $48, and fixed manufacturing costs at the normal operating level of 12,000 units are $240,000. Variable selling expenses are $19 per unit sold. Fixed administrative expenses total $104,000. Chandler had no beginning inventory in 2016. During 2016, the company produced12,000 units and sold 9,000. Would net income for Chandler Company in 2016 be higher if calculated using variable costing or using absorption costing Calculate reported income using each method. Do not use negative signs with any answers. Absorption Costing Income Statement Sales 963,000 Cost of Goods Sold: Beginning inventory Variable Costs 576.000 Fixed Costs 240.000 Less: Ending inventory Cost of Goods Sold Gross profi. Contribution margin Administrative expense 104.000 Net income Variable Costing Income Statement Sales 963.000 Cost of Goods Sold: Beginning inventory Variable Costs Variable cost of goods sold Fixed costs: Administrative Expense Total Fixed Cost

Absorption Costing Chandler Company sells its product for $107 per unit. Variable manufacturing costs per unit are $48, and fixed manufacturing costs at the normal operating level of 12,000 units are $240,000. Variable selling expenses are $19 per unit sold. Fixed administrative expenses total $104,000. Chandler had no beginning inventory in 2016. During 2016, the company produced12,000 units and sold 9,000. Would net income for Chandler Company in 2016 be higher if calculated using variable costing or using absorption costing Calculate reported income using each method. Do not use negative signs with any answers. Absorption Costing Income Statement Sales 963,000 Cost of Goods Sold: Beginning inventory Variable Costs 576.000 Fixed Costs 240.000 Less: Ending inventory Cost of Goods Sold Gross profi. Contribution margin Administrative expense 104.000 Net income Variable Costing Income Statement Sales 963.000 Cost of Goods Sold: Beginning inventory Variable Costs Variable cost of goods sold Fixed costs: Administrative Expense Total Fixed Cost

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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If a company chooses a price to charge for its product by adding up all the expenses necessary to make the product and then adding in a profit, this is known as: a) Target Costing Ob) Skimming Pricing Oc) Cost-Based Pricing Od) Odd-Even Pricing Oe) Penetration Pricing
Profitability changes may be simply calculated by using what kind of tool: sales price/volume/variable costs/fixed costs.
What is the difference in variable costing and absorption costing on the income statement? Which method is useful for manager's in making pricing and costing decisions?
1. Activity based costing is likely a more advantageous costing methold versus traditonal costing, to facilliate which of the following type of analysis? a) analysis of service organization cost b) analysis of channel profitablity c) analysis of long term profitablity d) analysis for reduction selling price of all products? 2. A ___ is any factor that causes a change in the cost of an activity. a) activity based cost b) cost pool c) cost driver d) standard 3. Which of the following is no a basic cost category for indirect cost? a) inventory financing cost b) Volume related cost c) Product batch cost d) activity based cost
Which of the following is a correct statement? O A. the fixed manufacturing cost is based on a per unit cost, when using Variable Costing O B. the fixed manufacturing cost is based on a per unit cost, when using Absorption Costing and a total cost, when using Variable Costing Oc the variable manufacturing cost is shown as a total cost in both Variable Costing and Absorption Costing O D. the fixed manufacturing cost is always shown as a total cost, when using Absorption Costing
If the units produced and unit sales are equal, which method would you expect to show the highernet operating income, variable costing or absorption costing? Why?
When planning and predicting costs at other volumes using a cost equation derived from either regression analysis or the high-low method, managers should consider general inflation. outliers. All of the answers in this list are correct. seasonality.
When preparing a forecasted contribution margin income statement and you are given the units produced, how do you compute dollars per unit?
What is the difference between a direct cost and an opportunity cost? Can you show the difference between these costs by sharing one (1) out-of-pocket cost and one (1) opportunity cost for something you did today?