Brindle Arts uses Variable Costing for internal purposes, but uses Absorption Costing for their financial reports. The following information is for Quarter 4, 2021 and Quarter 1, 2022. Calculate unit product costs for Quarters 4 and 1 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 $ 150 Quarter 4 Quarter 1 Variable costs per unit Units in beginning inventory - 1,750 Direct materials $ 45.00 Production (in units) 15,000 10,750 Direct labor $ 20.00 Sales (in units) 13,250 12,500 Variable overhead $ 15.00 Ending inventory 1,750 - Variable S&A $ 10.00 Fixed Costs in total per quarter Fixed manufacturing overhead $325,000 $ 25 Fixed selling & administrative $175,000 Show the difference between variable costing NOI and absorption costing NOI. Variable Costing Compute the unit product costs for Quarters 4 and 1 Quarter 4 Quarter 1 Units in beginning inventory Quarter 4 Quarter 1 + units produced Variable unit product cost - units sold = units in ending inventory Prepare an income statement for Quarters 4 and 1 FOH costs in ending inventory Quarter 4 Quarter 1 - FOH in beg. inv. Sales = FOH deferred in inventory Variable expenses: or released from inventory Variable CoGS Variable S&A Variable NOI Total variable expenses Add/less: FOH deferred/released in inventory Contribution Margin Fixed expenses: Absorption costing NOI Fixed MOH Fixed S&A Total fixed expenses Net Operating Income Absorption Costing Compute the unit product costs for Quarters 4 and 1 Quarter 4 Quarter 1 Absorption unit product cost Prepare an income statement for Quarters 4 and 1 Quarter 4 Quarter 1 Sales CoGS Gross Margin S&A Expenses Net Operating Income

Brindle Arts uses Variable Costing for internal purposes, but uses Absorption Costing for their financial reports. The following information is for Quarter 4, 2021 and Quarter 1, 2022. Calculate unit product costs for Quarters 4 and 1 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 $ 150 Quarter 4 Quarter 1 Variable costs per unit Units in beginning inventory - 1,750 Direct materials $ 45.00 Production (in units) 15,000 10,750 Direct labor $ 20.00 Sales (in units) 13,250 12,500 Variable overhead $ 15.00 Ending inventory 1,750 - Variable S&A $ 10.00 Fixed Costs in total per quarter Fixed manufacturing overhead $325,000 $ 25 Fixed selling & administrative $175,000 Show the difference between variable costing NOI and absorption costing NOI. Variable Costing Compute the unit product costs for Quarters 4 and 1 Quarter 4 Quarter 1 Units in beginning inventory Quarter 4 Quarter 1 + units produced Variable unit product cost - units sold = units in ending inventory Prepare an income statement for Quarters 4 and 1 FOH costs in ending inventory Quarter 4 Quarter 1 - FOH in beg. inv. Sales = FOH deferred in inventory Variable expenses: or released from inventory Variable CoGS Variable S&A Variable NOI Total variable expenses Add/less: FOH deferred/released in inventory Contribution Margin Fixed expenses: Absorption costing NOI Fixed MOH Fixed S&A Total fixed expenses Net Operating Income Absorption Costing Compute the unit product costs for Quarters 4 and 1 Quarter 4 Quarter 1 Absorption unit product cost Prepare an income statement for Quarters 4 and 1 Quarter 4 Quarter 1 Sales CoGS Gross Margin S&A Expenses Net Operating Income

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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Brindle Arts uses Variable Costing for internal purposes, but uses Absorption Costing for their financial reports. The following information is for Quarter 4, 2021 and Quarter 1, 2022.
Calculate unit product costs for Quarters 4 and 1 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	$ 150

	Quarter 4	Quarter 1		Variable costs per unit
Units in beginning inventory	-	1,750		Direct materials	$ 45.00
Production (in units)	15,000	10,750		Direct labor	$ 20.00
Sales (in units)	13,250	12,500		Variable overhead	$ 15.00
Ending inventory	1,750	-		Variable S&A	$ 10.00

Fixed Costs in total per quarter
Fixed manufacturing overhead		$325,000	$ 25
Fixed selling & administrative		$175,000

				Show the difference between variable costing NOI and absorption costing NOI.
Variable Costing
Compute the unit product costs for Quarters 4 and 1			Quarter 4	Quarter 1
				Units in beginning inventory
	Quarter 4	Quarter 1		+ units produced
Variable unit product cost				- units sold
				= units in ending inventory
Prepare an income statement for Quarters 4 and 1
				FOH costs in ending inventory
	Quarter 4	Quarter 1		- FOH in beg. inv.
Sales				= FOH deferred in inventory
Variable expenses:				or released from inventory
Variable CoGS
Variable S&A				Variable NOI
Total variable expenses				Add/less: FOH deferred/released in inventory
Contribution Margin
Fixed expenses:				Absorption costing NOI
Fixed MOH
Fixed S&A
Total fixed expenses
Net Operating Income


Absorption Costing
Compute the unit product costs for Quarters 4 and 1

	Quarter 4	Quarter 1
Absorption unit product cost

Prepare an income statement for Quarters 4 and 1

	Quarter 4	Quarter 1
Sales
CoGS
Gross Margin
S&A Expenses
Net Operating Income

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