not gradedVariable and Absorption CostingScott Manufacturing makes only one product with total unit manufacturing costs of $57, of which $39 is variable. No units were on hand at the beginning of 2015. During 2015 and 2016, the only product manufactured was sold for $89 per unit, and the cost structure did not change. Scott uses the first-in, first-out inventory method and has the following production and sales for 2015 and 2016 Units ManufacturedUnits Sold2015120,00090,0002016120,000130,000 a. Prepare gross profit computations for 2015 and 2016 using absorption costing.Do not use negative signs with your answers.Absorption Costing 2015 2016Sales Answer Answer Cost of goods sold: Beginning inventory Answer Answer Production Answer Answer Goods available Answer Answer Less: Ending inventory Answer Answer Cost of goods sold Answer Answer Gross profit Answer Answer b. Prepare gross profit computations for 2015 and 2016 using variable costing.Do not use negative signs with your answers.Variable Costing 2015 2016Sales Answer Answer Variable cost of goods sold: Beginning inventory Answer Answer Production Answer Answer Goods available Answer Answer Less: Ending inventory Answer Answer Variable cost of goods sold Answer Answer Less: Fixed manufacturing costs Answer Answer Gross profit Answer Answer c. Explain how your answers illustrate the impact of differences between production and sales volumes on the gross profits reported each year under absorption and variable costing.Select the most appropriate statement.If production volume exceeds sales volume, the absorption costing gross profit will be higher than the variable costing gross profit.If sales volume exceeds production volume, the absorption costing gross profit will be higher than the variable costing gross profit.If production volume exceeds sales volume, the variable costing gross profit will be higher than the absorption costing gross profit.If sales volume exceeds production volume, the variable costing gross profit will be lower than the absorption costing gross profit. Question 2Partially correctMark 0.33 out of 1.00 Flag questionQuestion textVariable and Absorption CostingSummarized data for 2016 (the first year of operations) for Gorman Products, Inc., are as follows:Sales (75,000 units) $3,000,000Production costs (80,000 units) Direct material 880,000Direct labor 720,000Manufacturing overhead: Variable 544,000Fixed 320,000Operating expenses: Variable 168,000Fixed 240,000Depreciation on equipment 60,000Real estate taxes 18,000Personal property taxes (inventory & equipment) 28,800Personnel department expenses 30,000 a. Prepare an income statement based on full absorption costing.Only use a negative sign with your answer for net income (loss), if the answer represents a net loss. Otherwise, do not use negative signs with any answers. Round answers to the nearest whole number, when applicable.Absorption Costing Income StatementSales Answer Cost of Goods Sold: Beginning Inventory Answer Direct materials Answer Direct labor Answer Answer Answer Less: Ending Inventory Answer Cost of Goods Sold Answer Answer Answer Answer Answer Net Income (Loss) Answer b. Prepare an income statement based on variable costing.Only use a negative sign with your answer for net income (loss), if the answer represents a net loss. Otherwise, do not use negative signs with any answers. Round answers to the nearest whole number, when applicable.Variable Costing Income StatementSales Answer Variable cost of Goods Sold: Beginning Inventory Answer Direct materials Answer Direct labor Answer Answer Answer Less: Ending Inventory Answer Variable cost of goods sold Answer Answer Answer Answer Answer Fixed costs: Answer Answer Operating expenses Answer Total Fixed Cost Answer Net Income (Loss) Answer c. Assume that you must decide quickly whether to accept a special one-time order for 1,000 units for $30 per unit.Which income statement presents the most relevant data? Answer Determine the apparent profit or loss on the special order based solely on these data.Use a negative sign with your answer if the special order creates an apparent loss. Round answer to the nearest whole number.$Answer d. If the ending inventory is destroyed by fire, which costing approach would you use as a basis for filing an insurance claim for the fire loss? Why?Select the most appropriate statement.Absorption costing approach because the cost should include a reasonable portion of fixed manufacturing costs.Variable costing approach because the cost should include a reasonable portion of fixed manufacturing costs.

Variable cost refers to the expenses which fluctuate with the change in the quantity produced or…

Answered: e and Absorption Costing Scott…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

	Units Manufactured	Units Sold
2015	120,000	90,000
2016	120,000	130,000

Absorption Costing
Sales	Answer	Answer
Cost of goods sold:
Beginning inventory	Answer	Answer
Production	Answer	Answer
Goods available	Answer	Answer
Less: Ending inventory	Answer	Answer
Cost of goods sold	Answer	Answer
Gross profit	Answer	Answer

Variable Costing
Sales	Answer	Answer
Variable cost of goods sold:
Beginning inventory	Answer	Answer
Production	Answer	Answer
Goods available	Answer	Answer
Less: Ending inventory	Answer	Answer
Variable cost of goods sold	Answer	Answer
Less: Fixed manufacturing costs	Answer	Answer
Gross profit	Answer	Answer

Question 2

Partially correct

Mark 0.33 out of 1.00

Flag question

Question text

Variable and Absorption Costing
Summarized data for 2016 (the first year of operations) for Gorman Products, Inc., are as follows:

Sales (75,000 units)					$3,000,000
Production costs (80,000 units)
Direct material					880,000
Direct labor					720,000
Manufacturing overhead:
Variable					544,000
Fixed					320,000
Operating expenses:
Variable					168,000
Fixed					240,000
Depreciation on equipment					60,000
Real estate taxes					18,000
Personal property taxes (inventory & equipment)					28,800
Personnel department expenses					30,000

a. Prepare an income statement based on full absorption costing.
Only use a negative sign with your answer for net income (loss), if the answer represents a net loss. Otherwise, do not use negative signs with any answers. Round answers to the nearest whole number, when applicable.

Absorption Costing Income Statement
Sales		Answer
Cost of Goods Sold:
Beginning Inventory	Answer
Direct materials	Answer
Direct labor	Answer
Answer	Answer
Less: Ending Inventory	Answer
Cost of Goods Sold		Answer
Answer		Answer
Answer		Answer
Net Income (Loss)		Answer

b. Prepare an income statement based on variable costing.
Only use a negative sign with your answer for net income (loss), if the answer represents a net loss. Otherwise, do not use negative signs with any answers. Round answers to the nearest whole number, when applicable.

Variable Costing Income Statement
Sales		Answer
Variable cost of Goods Sold:
Beginning Inventory	Answer
Direct materials	Answer
Direct labor	Answer
Answer	Answer
Less: Ending Inventory	Answer
Variable cost of goods sold		Answer
Answer		Answer
Answer		Answer
Fixed costs:
Answer	Answer
Operating expenses	Answer
Total Fixed Cost		Answer
Net Income (Loss)		Answer

c. Assume that you must decide quickly whether to accept a special one-time order for 1,000 units for $30 per unit.

Which income statement presents the most relevant data? Answer

Determine the apparent profit or loss on the special order based solely on these data.
Use a negative sign with your answer if the special order creates an apparent loss. Round answer to the nearest whole number.

$Answer

d. If the ending inventory is destroyed by fire, which costing approach would you use as a basis for filing an insurance claim for the fire loss? Why?
Select the most appropriate statement.

Absorption costing approach because the cost should include a reasonable portion of fixed manufacturing costs.

Variable costing approach because the cost should include a reasonable portion of fixed manufacturing costs.

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

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.