Compute for the net operating income under variable costing for year 1 Duif Company's absorption costing income statements for the last two years are presentedbelow:Year 1Year 2Sales$70,000$90,000Less cost of goods sold:Beginning inventory6,000Add cost of goods manufactured48,00048,00054,000Goods available for sale48,000Less ending inventoryCost of goods sold6,00042,00054,00028,000Gross marginLess selling & admin. expenses36,00025,00031,000Net operating income$ 3,000$ 5,000Data on units produced and sold in each of these years are given below:Year 1Year 2Units in beginning inventoryUnits produced1,0008,0008,000Units sold7,0009,000Fixed factory overhead totaled $16,000 in each year. This overhead was applied toproducts at a rate of $2 per unit. Variable selling and administrative expenses were $3per unit sold.

Increase in inventory for year 1 = Units produced - units sold = 8000 - 7000 = 1000

Duif Company's absorption costing income statements for the last two years are presented below: Year 1 Year 2 Sales $70,000 $90,000 Less cost of goods sold: Beginning inventory 6,000 Add cost of goods manufactured 48,000 48,000 48,000 Goods available for sale 54,000 Less ending inventory Cost of goods sold Gross margin Less selling & admin. expenses Net operating income 6,000 42,000 54,000 28,000 36,000 25,000 31,000 $ 3,000 $ 5,000 Data on units produced and sold in each of these years are given below: Year 1 Year 2 Units in beginning inventory Units produced 1,000 8,000 8,000 Units sold 7,000 9,000 Fixed factory overhead totaled $16,000 in each year. This overhead was applied to products at a rate of $2 per unit. Variable selling and administrative expenses were $3 per unit sold.

Duif Company's absorption costing income statements for the last two years are presented below: Year 1 Year 2 Sales $70,000 $90,000 Less cost of goods sold: Beginning inventory 6,000 Add cost of goods manufactured 48,000 48,000 48,000 Goods available for sale 54,000 Less ending inventory Cost of goods sold Gross margin Less selling & admin. expenses Net operating income 6,000 42,000 54,000 28,000 36,000 25,000 31,000 $ 3,000 $ 5,000 Data on units produced and sold in each of these years are given below: Year 1 Year 2 Units in beginning inventory Units produced 1,000 8,000 8,000 Units sold 7,000 9,000 Fixed factory overhead totaled $16,000 in each year. This overhead was applied to products at a rate of $2 per unit. Variable selling and administrative expenses were $3 per unit sold.

College Accounting, Chapters 1-27

23rd Edition

ISBN:9781337794756

Author:HEINTZ, James A.

Publisher:HEINTZ, James A.

Chapter13: Accounting For Merchandise Inventory

Section: Chapter Questions

Problem 7SPB: COST ALLOCATION AND LOWER-OF-COST-OR-MARKET Hall Companys beginning inventory and purchases during...

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