During the first month of operations ended June 30, 2016, Lucky Inc., has no beginning inventory and sales are estimated 20,000 units at $75 per unit. Also, sales can not be changed if more than 20,000 units are made. And next month, management of Lucky is evaluating whether to make 20,000 units(proposal 1) or 25,000 units(proposal 2). Costs and expenditures related to each proposal are shown below. Operating data for the month are summarized as follows; . unit price : $75 . unit variable manufacturing cost : $35 . fixed manufacturing cast : $400,000 . unit variable selling and administrative cost : $5 . fixed selling and administrative cost : $100,000 Instructions) 1. Make Absorption Costing Income Statement for Proposal 1 and Proposal 2 2. Make Variable Costing Income Statement for Proposal 1 and Proposal 2 3. Comment the following sentence "managers could misinterpret increases in income from operations due to changes in efficiencies"based on the answer from question 1 and question 2.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question
During the first month of operations ended June 30, 2016, Lucky Inc., has no
beginning inventory and sales are estimated 20,000 units at $75 per unit. Also.
............-
sales can not be changed if more than 20,000 units are made. And next month,
management of Lucky is evaluating whether to make 20,000 units(proposal 1) or
25,000 units(proposal 2). Costs and expenditures related to each proposal are
shown below. Operating data for the month are summarized as follows:
. unit price : $75
. unit variable manufacturing cost : $35
. fixed manufacturing cost : $400,000
. unit variable selling and administrative cost : $5
. fixed selling and administrative cost : $100,000
Instructions)
1. Make Absorption Costing Income Statement for Proposal 1 and Proposal 2
2. Make Variable Costing Income Statement for Proposal 1 and Proposal 2
3. Comment the following sentence "managers could misinterpret increases in
income from operations due to changes in efficiencies"based on the answer from
question 1 and question 2.
Transcribed Image Text:During the first month of operations ended June 30, 2016, Lucky Inc., has no beginning inventory and sales are estimated 20,000 units at $75 per unit. Also. ............- sales can not be changed if more than 20,000 units are made. And next month, management of Lucky is evaluating whether to make 20,000 units(proposal 1) or 25,000 units(proposal 2). Costs and expenditures related to each proposal are shown below. Operating data for the month are summarized as follows: . unit price : $75 . unit variable manufacturing cost : $35 . fixed manufacturing cost : $400,000 . unit variable selling and administrative cost : $5 . fixed selling and administrative cost : $100,000 Instructions) 1. Make Absorption Costing Income Statement for Proposal 1 and Proposal 2 2. Make Variable Costing Income Statement for Proposal 1 and Proposal 2 3. Comment the following sentence "managers could misinterpret increases in income from operations due to changes in efficiencies"based on the answer from question 1 and question 2.
Expert Solution
steps

Step by step

Solved in 4 steps with 6 images

Blurred answer
Knowledge Booster
Cost Sheet
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education