ACC5200/Summer2021/Chapter 2/Homework Problems Comparison of Costing Methods The Jarvis Company sells its razors at $6 per unit. The company incurs fixed manufacturing overhead costs of $1,280,000 each year to support production of 1,600,000 units so that the fixed manufacturing overhead cost per unit equals $0.8 ( 1,280,000 /1,600,000 units). The following data are related to its first 2 years of operation, all numbers are in thousands: Year 1 Year 2 Sales 1,050 units 1,300 units Production 1,600 units 1,050 units Costs Variable manufacturing $ 1,280 $ 840 Fixed manufacturing 1,280 1,280 Variable operating (marketing) Fixed operating (marketing) 900 1,200 500 500 1.Prepare income statements based on variable costing for each of the 2 years. 2.Prepare income statements based on absorption costing for each of the 2 years. 3.Prepare a numerical reconciliation and explanation of the difference between operating income for each year under absorption costing and variable costing. 4.Critics have claimed that a widely used accounting system has led to undesirable buildups of inventory levels. (a) Is variable costing or absorption costing more likely to lead to such

ACC5200/Summer2021/Chapter 2/Homework Problems Comparison of Costing Methods The Jarvis Company sells its razors at $6 per unit. The company incurs fixed manufacturing overhead costs of $1,280,000 each year to support production of 1,600,000 units so that the fixed manufacturing overhead cost per unit equals $0.8 ( 1,280,000 /1,600,000 units). The following data are related to its first 2 years of operation, all numbers are in thousands: Year 1 Year 2 Sales 1,050 units 1,300 units Production 1,600 units 1,050 units Costs Variable manufacturing $ 1,280 $ 840 Fixed manufacturing 1,280 1,280 Variable operating (marketing) Fixed operating (marketing) 900 1,200 500 500 1.Prepare income statements based on variable costing for each of the 2 years. 2.Prepare income statements based on absorption costing for each of the 2 years. 3.Prepare a numerical reconciliation and explanation of the difference between operating income for each year under absorption costing and variable costing. 4.Critics have claimed that a widely used accounting system has led to undesirable buildups of inventory levels. (a) Is variable costing or absorption costing more likely to lead to such

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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Please help with question marks and show work Cookie Business Productions Costs: Direct material $ 0.60 Direct labor $ 1.00 Variable manufacturing overhead $ 0.40 Total variable manufacturing costs per unit $ 2.00 Fixed manufacturing overhead per year $ 139,000.00 In addition, the company has fixed selling and administrative costs: Fixed selling costs per year $ 50,000.00 Fixed administrative costs per year $ 65,000.00 Selling price per cookie $ 3.75 Number of cookies produced 2,780,000 Number of cookies sold 2,600,000 Full (absorption) costing : Full cost per unit $ ??? Ending Inventory Full (absorption) costing $ ??? Variable costing : Variable cost per unit $ ??? Ending Inventory Variable costing $ ???
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Required information [The following information applies to the questions displayed below.] O'Brien Company manufactures and sells one product. The following information pertains to each of the company's first three 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 $560,000 $100,000 During its first year of operations, O'Brien produced 98,000 units and sold 75,000 units. During its second year of operations, it produced 80,000 units and sold 98,000 units. In its third year, O'Brien produced 90,000 units and sold 85,000 units. The selling price of the company's product is $74 per unit. 2. Assume the company uses variable costing and a LIFO inventory flow assumption (LIFO means last-in first-out. In other words, it assumes that the newest units in inventory are sold first): a.…
Required information [The following information applies to the questions displayed below.] Kubin Company's relevant range of production is 18,000 to 22,000 units. When it produces and sells 20,000 units, its average costs per unit are as follows: Average Cost per Unit $ 7.00 $ 4.00 $ 1.50 $ 5.00 $ 3.50 $ 2.50 $ 1.00 $ 0.50 Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Fixed selling expense Fixed administrative expense Sales commissions Variable administrative expense Required: 1. Assume the cost object is units of production: a. What is the total direct manufacturing cost incurred to make 20,000 units? b. What is the total indirect manufacturing cost incurred to make 20,000 units? 2. Assume the cost object is the Manufacturing Department and that its total output is 20,000 units. a. How much total manufacturing cost is directly traceable to the Manufacturing Department? b. How much total manufacturing cost is an indirect cost that cannot be…
Required information [The following information applies to the questions displayed below.] Kubin Company's relevant range of production is 18,000 to 22,000 units. When it produces and sells 20,000 units, its average costs per unit are as follows: Average Cost per Unit $ 7.00 $ 4.00 $ 1.50 $ 5.00 $ 3.50 $ 2.50 $ 1.00 $ 0.50 Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Fixed selling expense Fixed administrative expense Sales commissions Variable administrative expense
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