Conan Company produces sporting equipment. In 2019, the first year of operations, Conan produced 25,000 units and sold 18,000 units. In 2020, the production and sales results were exactly reversed. In each year, selling price was $100, variable manufacturing costs were S40 per unit, variable selling expenses were $8 per unit, fixed manufacturing costs were $540,000, and fixed administrative expenses were $200,000. Instructions a) Calculate net income under variable costing for each year. b) Calculate net income under absorption costing for each year. c) Reconcile the differences each year in income from operations under the two costing approaches.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Conan Company produces sporting equipment. In 2019, the first year of operations, Conan
produced 25,000 units and sold 18,000 units. In 2020, the production and sales results were
exactly reversed. In each year, selling price was $100, variable manufacturing costs were $40
per unit, variable selling expenses were $8 per unit, fixed manufacturing costs were $540,000,
and fixed administrative expenses were $200,000.
Instructions
a) Calculate net income under variable costing for each year.
b) Calculate net income under absorption costing for each year.
c) Reconcile the differences each year in income from operations under the two costing
approaches.
Transcribed Image Text:Conan Company produces sporting equipment. In 2019, the first year of operations, Conan produced 25,000 units and sold 18,000 units. In 2020, the production and sales results were exactly reversed. In each year, selling price was $100, variable manufacturing costs were $40 per unit, variable selling expenses were $8 per unit, fixed manufacturing costs were $540,000, and fixed administrative expenses were $200,000. Instructions a) Calculate net income under variable costing for each year. b) Calculate net income under absorption costing for each year. c) Reconcile the differences each year in income from operations under the two costing approaches.
Nick's Nuts and Bolts Inc. reported the following data for the month of September:
Conversion
Units
Percentage Complete
Work in process, September 1
2,500
60%
Units started
Completed and transferred out
Work in process, September 30
7,000
7,500
2,000
10%
Costs for September
Work in process, September 1
Added in September
Materials
$37,875
$50,000
Conversion
$17,800
$90,000
Nick's uses the weighted-average method of process costing, and all materials are added at the
start of the process. Each unit contains 100 bolts.
Instructions
Prepare a production cost report for September using the weighted-average method of process
costing.
Transcribed Image Text:Nick's Nuts and Bolts Inc. reported the following data for the month of September: Conversion Units Percentage Complete Work in process, September 1 2,500 60% Units started Completed and transferred out Work in process, September 30 7,000 7,500 2,000 10% Costs for September Work in process, September 1 Added in September Materials $37,875 $50,000 Conversion $17,800 $90,000 Nick's uses the weighted-average method of process costing, and all materials are added at the start of the process. Each unit contains 100 bolts. Instructions Prepare a production cost report for September using the weighted-average method of process costing.
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