Exercise 6-12 (Algo) Variable Costing Income Statement; Reconciliation [LO6-2, LO6-3] Whitman Company has just completed its first year of operations. The company's absorption costing income statement for the year follows: Whitman Company Income Statement Sales (42,000 units \times $44.10 per unit) $1,852,200 Cost of goods sold (42,000 units \times $ 24 per unit) 1,008,000 Gross margin 844, 200 Selling and administrative expenses 525,000 Net operating income $ 319,200 The company's selling and administrative expenses consist of $315,000 per year in fixed expenses and $5 per unit sold in variable expenses. The $24 unit product cost given above is computed as follows: Direct materials $ 12 Direct labor 3 Variable manufacturing overhead 4 Fixed manufacturing overhead ($270,000 54, 000 units) 5 Absorption costing unit product cost $ 24 Required: 1. Redo the company's income statement in the contribution format using variable costing. 2. Reconcile any difference between the net operating income on your variable costing income statement and the net operating income on the absorption costing income statement above.

Exercise 6-12 (Algo) Variable Costing Income Statement; Reconciliation [LO6-2, LO6-3] Whitman Company has just completed its first year of operations. The company's absorption costing income statement for the year follows: Whitman Company Income Statement Sales (42,000 units \times $44.10 per unit) $1,852,200 Cost of goods sold (42,000 units \times $ 24 per unit) 1,008,000 Gross margin 844, 200 Selling and administrative expenses 525,000 Net operating income $ 319,200 The company's selling and administrative expenses consist of $315,000 per year in fixed expenses and $5 per unit sold in variable expenses. The $24 unit product cost given above is computed as follows: Direct materials $ 12 Direct labor 3 Variable manufacturing overhead 4 Fixed manufacturing overhead ($270,000 54, 000 units) 5 Absorption costing unit product cost $ 24 Required: 1. Redo the company's income statement in the contribution format using variable costing. 2. Reconcile any difference between the net operating income on your variable costing income statement and the net operating income on the absorption costing income statement above.

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter3: Cost Behavior And Cost Forecasting

Section: Chapter Questions

Problem 54E: Income Statements under Absorption and Variable Costing In the coming year, Kalling Company expects...

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Contribution margin, break-even sales, cost-volume-profit chart, margin of safety, and operating leverage Belmain Co. expects to maintain the same inventories at the end of 20Y7 as at the beginning of the year. The total of all production costs for the year is therefore assumed to be equal to the cost of goods sold. With this in mind, the various department heads were asked to submit estimates of the costs for their departments during the year. A summary report of these estimates is as follows: It is expected that 12,000 units will be sold at a price of 240 a unit. Maximum sales within the relevant range are 18,000 units. Instructions 1. Prepare an estimated income statement for 20Y7. 2. What is the expected contribution margin ratio? 3. Determine the break-even sales in units and dollars. 4. Construct a cost-volume-profit chart indicating the break-even sales. 5. What is the expected margin of safety in dollars and as a percentage of sales? (Round to one decimal place.) 6. Determine the operating leverage.
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Quality Cost Report Whitley Company had total sales of 1,000,000 for the year ending 20X1. The costs of quality are given below. Required: 1. Prepare a quality cost report, classifying costs by category and expressing each category as a percentage of sales. What message does the cost report provide? 2. Prepare a bar graph and pie chart that illustrate each categorys contribution to total quality costs. Comment on the significance of the distribution.
Exercise 6-13 (Algo) Changes in Selling Price, Sales Volume, Variable Cost per Unit, and Total Fixed Costs [LO6-1, LO6-4] Miller Company's contribution format income statement for the most recent month is shown below: Total $ 195,000 78,000 117,000 49,000 $ 68,000 Sales (39,000 units) Variable expenses Contribution margin Fixed expenses Net operating income Required: (Consider each case independently): Per Unit $5.00 2.00 $ 3.00 1. What is the revised net operating income if unit sales increase by 12%? 2. What is the revised net operating income if the selling price decreases by $1.20 per unit and the number of units sold increases by 16%? 3. What is the revised net operating income if the selling price increases by $1.20 per unit, fixed expenses increase by $10,000, and the number of units sold decreases by 5%? 4. What is the revised net operating income if the selling price per unit increases by 20%, variable expenses increase by 20 cents per unit, and the number of units sold…
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Exercise 6-13 (Algo) Changes in Selling Price, Sales Volume, Variable Cost per Unit, and Total Fixed Costs [LO6-1, LO6-4] Miller Company's contribution format income statement for the most recent month is shown below: Per Unit $6.00 3.00 $ 3.00 Sales (41,000 units) Variable expenses Contribution margin Fixed expenses Net operating income Required: (Consider each case independently): Total $ 246,000 123,000 123,000 44,000 $ 79,000 1. What is the revised net operating income if unit sales increase by 11%? 2. What is the revised net operating income if the selling price decreases by $1.30 per unit and the number of units sold increases by 19%? 1. Net operating income 2. Net operating income 3. Net operating income 4. Net operating income 3. What is the revised net operating income if the selling price increases by $1.30 per unit, fixed expenses increase by $7,000, and the number of units sold decreases by 2%? 4. What is the revised net operating income if the selling price per unit…
Required information [The following information applies to the questions displayed below.] Hudson Company reports the following contribution margin income statement. HUDSON COMPANY Contribution Margin Income Statement For Year Ended December 31 Sales (10,800 units at $280 each) Variable costs (10,800 units at $210 each) Contribution margin Fixed costs Income $ 3,024,000 2,268,000 756,000 567,000 $ 189,000 1. Assume Hudson has a target income of $162,000. What amount of sales (in dollars) is needed to produce this target income? 2. If Hudson achieves its target income, what is its margin of safety (in percent)? (Round your answer to 1 decimal place.) 1. Amount of sales 2. Margin of safety %
ok t nt ences Whitman Company has just completed its first year of operations. The company's absorption costing income statement for the year follows: Whitman Company Income Statement Sales (42,000 units x $44.60 per unit) Cost of goods sold (42,000 units x $26 per unit) Gross margin Selling and administrative expenses Net operating income Direct materials Direct labor The company's selling and administrative expenses consist of $315,000 per year in fixed expenses and $5 per unit sold in variable expenses. The $26 unit product cost given above is computed as follows: $ 1,873,200 1,092,000 781,200 525,000 $ 256,200 Variable manufacturing overhead Fixed manufacturing overhead ($318,000+ 53,000 units) Absorption costing unit product cost $12 4 4 6 $26 Required: 1. Redo the company's income statement in the contribution format using variable costing. 2. Reconcile any difference between the net operating income on your variable costing income statement and the net operating income on the…
Required information [The following information applies to the questions displayed below.] Hudson Company reports the following contribution margin income statement. HUDSON COMPANY Contribution Margin Income Statement For Year Ended December 31 Sales (11,600 units at $225 each) Variable costs (11,600 units at $180 each) Contribution margin Fixed costs Income $ 2,610,000 2,088,000 522,000 315,000 $ 207,000 1. Assume Hudson has a target income of $150,000. What amount of sales (in dollars) is needed to produce this target income? 2. If Hudson achieves its target income, what is its margin of safety (in percent)? (Round your answer to 1 decimal place.)