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Absorption vs. Variable Costing Brindle Arts uses Variable Costing for internal purposes, but uses Absorption Costing for their financial reports. The following information is for Quarter 2 and Quarter 3 of 2020. Calculate unit product costs for Quarters 2 & 3 for Variable and Absorption Costing, prepare an income statement for each method, then show why there is a difference between the two. Selling price per unit 200 Quarter 2 Variable costs per unit Quarter 3 Units in beginning inventory Production (in units) Sales (in units) Ending inventory Direct materials Direct labor Variable overhead Variable S&A 3,000 65.00 15,000 7,500 $ 30.00 12,000 10,500 2$ 15.00 3,000 10.00 Fixed Costs in total Fixed manufacturing overhead Fixed selling & administrative $350,000 $200,000 Show the difference between variable costing NOI and absorption costing NOI. Variable Costing Compute the unit product costs for Quarters 2 & 3 Quarter 2 Quarter 3 Units in beginning inventory + units produced |- units sold = units in ending inventory Quarter 2 Quarter 3 Variable unit product cost Prepare an income statement for Quarters 2 & 3 FOH costs in ending inventory FOH in beg. inv. = FOH deferred in inventory or (released from inventory) Quarter 2 Quarter 3 Sales Variable expenses: Select one Select one Variable COGS Variable NOI Add: FOH deferred in inv. Less: FOH released from inv. Absorption costing NOI Variable S&A Total variable expenses Contribution Margin Fixed expenses: **Hint: be Fixed MOH Fixed S&A Total fixed expenses Net Operating Income

Absorption vs. Variable Costing Brindle Arts uses Variable Costing for internal purposes, but uses Absorption Costing for their financial reports. The following information is for Quarter 2 and Quarter 3 of 2020. Calculate unit product costs for Quarters 2 & 3 for Variable and Absorption Costing, prepare an income statement for each method, then show why there is a difference between the two. Selling price per unit 200 Quarter 2 Variable costs per unit Quarter 3 Units in beginning inventory Production (in units) Sales (in units) Ending inventory Direct materials Direct labor Variable overhead Variable S&A 3,000 65.00 15,000 7,500 $ 30.00 12,000 10,500 2$ 15.00 3,000 10.00 Fixed Costs in total Fixed manufacturing overhead Fixed selling & administrative $350,000 $200,000 Show the difference between variable costing NOI and absorption costing NOI. Variable Costing Compute the unit product costs for Quarters 2 & 3 Quarter 2 Quarter 3 Units in beginning inventory + units produced |- units sold = units in ending inventory Quarter 2 Quarter 3 Variable unit product cost Prepare an income statement for Quarters 2 & 3 FOH costs in ending inventory FOH in beg. inv. = FOH deferred in inventory or (released from inventory) Quarter 2 Quarter 3 Sales Variable expenses: Select one Select one Variable COGS Variable NOI Add: FOH deferred in inv. Less: FOH released from inv. Absorption costing NOI Variable S&A Total variable expenses Contribution Margin Fixed expenses: **Hint: be Fixed MOH Fixed S&A Total fixed expenses Net Operating Income

FINANCIAL ACCOUNTING
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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Absorption vs. Variable

Absorption vs. Variable Costing Brindle Arts uses Variable Costing for internal purposes, but uses Absorption Costing for their financial reports. The following information is for Quarter 2 and Quarter 3 of 2020. Calculate unit product costs for Quarters 2 & 3 for Variable and Absorption Costing, prepare an income statement for each method, then show why there is a difference between the two. Selling price per unit 200 Quarter 2 Quarter 3 Variable costs per unit Units in beginning inventory Production (in units) Sales (in units) Ending inventory Direct materials Direct labor Variable overhead 3,000 $ 65.00 15,000 7,500 30.00 12,000 10,500 15.00 3,000 Variable S&A 10.00 Fixed Costs in total Fixed manufacturing overhead Fixed selling & administrative $350,000 $200,000 Show the difference between variable costing NOI and absorption costing NOI. Variable Costing Compute the unit product costs for Quarters 2 & 3 Quarter 2 Quarter 3 Units in beginning inventory Quarter 2 Quarter 3 + units produced Variable unit product cost - units sold = units in ending inventory Prepare an income statement for Quarters 2 & 3 FOH costs in ending inventory Quarter 2 Quarter 3 - FOH in beg. inv. = FOH deferred in inventory or (released from inventory) Sales Variable expenses: Select one Select one Variable COGS Variable NOI Add: FOH deferred in inv. Less: FOH released from inv. Variable S&A Total variable expenses Contribution Margin Fixed expenses: **Hint: be careful of signs Absorption costing NOI Fixed MOH Fixed S&A Total fixed expenses Net Operating Income
Transcribed Image Text:Absorption vs. Variable Costing Brindle Arts uses Variable Costing for internal purposes, but uses Absorption Costing for their financial reports. The following information is for Quarter 2 and Quarter 3 of 2020. Calculate unit product costs for Quarters 2 & 3 for Variable and Absorption Costing, prepare an income statement for each method, then show why there is a difference between the two. Selling price per unit 200 Quarter 2 Quarter 3 Variable costs per unit Units in beginning inventory Production (in units) Sales (in units) Ending inventory Direct materials Direct labor Variable overhead 3,000 $ 65.00 15,000 7,500 30.00 12,000 10,500 15.00 3,000 Variable S&A 10.00 Fixed Costs in total Fixed manufacturing overhead Fixed selling & administrative $350,000 $200,000 Show the difference between variable costing NOI and absorption costing NOI. Variable Costing Compute the unit product costs for Quarters 2 & 3 Quarter 2 Quarter 3 Units in beginning inventory Quarter 2 Quarter 3 + units produced Variable unit product cost - units sold = units in ending inventory Prepare an income statement for Quarters 2 & 3 FOH costs in ending inventory Quarter 2 Quarter 3 - FOH in beg. inv. = FOH deferred in inventory or (released from inventory) Sales Variable expenses: Select one Select one Variable COGS Variable NOI Add: FOH deferred in inv. Less: FOH released from inv. Variable S&A Total variable expenses Contribution Margin Fixed expenses: **Hint: be careful of signs Absorption costing NOI Fixed MOH Fixed S&A Total fixed expenses Net Operating Income
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