Donovan Inc. calculates income under absorption costing. The company provides bonuses to managers based on the operating income of the division. In 2021, the Deck division has the following financial results: Sales (100,000 units) Cost of Goods Sold Opening Inventory Cost of Goods Manufactured (125,000 units) Variable Costs 8,000,000 4,500,000 3,000,000 7,500,000 1,500,000 6,000,000 2,000,000 Fixed Costs Ending Inventory COGS Gross Margin Selling and Admin Expenses -$ 650,000 1,000,000 1,650,000 350,000 Variable Fixed 24 Operating Income The old manager for the Deck division left in early 2021. A new manager was hired in 2022. The new manager produced 90,000 units and sold 98,000 units in 2022. REQUIRED A) Calculate the operating income for 2022 using absorption costing. Use an income statement to show your work. B) Calculate the operating income for 2022 using variable costing. Do not use an income statement as part of your calculation.
Donovan Inc. calculates income under absorption costing. The company provides bonuses to managers based on the operating income of the division. In 2021, the Deck division has the following financial results: Sales (100,000 units) Cost of Goods Sold Opening Inventory Cost of Goods Manufactured (125,000 units) Variable Costs 8,000,000 4,500,000 3,000,000 7,500,000 1,500,000 6,000,000 2,000,000 Fixed Costs Ending Inventory COGS Gross Margin Selling and Admin Expenses -$ 650,000 1,000,000 1,650,000 350,000 Variable Fixed 24 Operating Income The old manager for the Deck division left in early 2021. A new manager was hired in 2022. The new manager produced 90,000 units and sold 98,000 units in 2022. REQUIRED A) Calculate the operating income for 2022 using absorption costing. Use an income statement to show your work. B) Calculate the operating income for 2022 using variable costing. Do not use an income statement as part of your calculation.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
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Transcribed Image Text:Donovan Inc. calculates income under absorption costing. The company provides bonuses to managers based on the operating income of the division. In 2021,
the Deck division has the following financial results:
Sales (100,000 units)
2$
8,000,000
Cost of Goods Sold
Opening Inventory
Cost of Goods Manufactured (125,000 units)
4,500,000
3,000,000
7,500,000
1,500,000
6,000,000
2,000,000
Variable Costs
Fixed Costs
Ending Inventory
COGS
-$
$
Gross Margin
Selling and Admin Expenses
Variable
$
650,000
Fixed
1,000,000
1,650,000
350,000
Operating Income
The old manager for the Deck division left in early 2021. A new manager was hired in 2022. The new manager produced 90,000 units and sold 98,000 units in 2022.
REQUIRED
A) Calculate the operating income for 2022 using absorption costing. Use an income statement to show your work.
B) Calculate the operating income for 2022 using variable costing. Do not use an income statement as part of your calculation.
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