.During the first month of operations ended January 31, Wardner Apparel produced 80,000 designer cowboy hats, of which 72,000 were sold. Operating data for the month are summarized as follows: Category Dollar Amount Subtotals/Totals Sales $4,560,000 Manufacturing Costs: Direct Materials $1,500,000 Direct Labor 1,480,000 Variable Manufacturing Costs 220,000 Fixed Manufacturing Costs 420,000 Total Manufacturing Costs 3,620,000 Selling and Admin Expenses: Variable 144,000 Fixed 35,000 Total Selling and Admin Expenses 179,000 During February, Wardner Apparel produced 64,000 designer cowboy hats and sold 72,000 cowboy hats. Operating data for February are summarized as follows: Category Dollar Amount Subtotals/Totals Sales $4,560,000 Manufacturing Costs: Direct Materials 1,350,000 Direct Labor 1,200,000 Variable Manufacturing Costs 190,000 Fixed Manufacturing Costs 420,000 Total Manufacturing Costs 3,160,000 Selling and Admin Expenses: Variable 144,000 Fixed 35,000 Total Selling and Admin Expenses 179,000 Using absorption costing, prepare income statements for (i) January and (ii) February. Using variable costing, prepare income statements for (i) January and (ii) February.
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
1.During the first month of operations ended January 31, Wardner Apparel produced 80,000 designer cowboy hats, of which 72,000 were sold. Operating data for the month are summarized as follows:
|
Category |
Dollar Amount |
Subtotals/Totals |
|
Sales |
|
$4,560,000 |
|
|
|
|
|
Direct Materials |
$1,500,000 |
|
|
Direct Labor |
1,480,000 |
|
|
Variable Manufacturing Costs |
220,000 |
|
|
Fixed Manufacturing Costs |
420,000 |
|
|
Total Manufacturing Costs |
|
3,620,000 |
|
|
|
|
|
Selling and Admin Expenses: |
|
|
|
Variable |
144,000 |
|
|
Fixed |
35,000 |
|
|
Total Selling and Admin Expenses |
|
179,000 |
During February, Wardner Apparel produced 64,000 designer cowboy hats and sold 72,000 cowboy hats. Operating data for February are summarized as follows:
|
Category |
Dollar Amount |
Subtotals/Totals |
|
Sales |
|
$4,560,000 |
|
Manufacturing Costs: |
|
|
|
Direct Materials |
1,350,000 |
|
|
Direct Labor |
1,200,000 |
|
|
Variable Manufacturing Costs |
190,000 |
|
|
Fixed Manufacturing Costs |
420,000 |
|
|
Total Manufacturing Costs |
|
3,160,000 |
|
|
|
|
|
Selling and Admin Expenses: |
|
|
|
Variable |
144,000 |
|
|
Fixed |
35,000 |
|
|
Total Selling and Admin Expenses |
|
179,000 |
- Using absorption costing, prepare income statements for (i) January and (ii) February.
- Using variable costing, prepare income statements for (i) January and (ii) February.
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- Explain the reason for the differences in the amount of income from operations in (a) and (b) for January.
- Explain the reason for the differences in the amount of income from operations in (a) and (b) for February.
- Based on your answers to (a) and (b), did Wardner Apparel operate more profitably in January or in February? Explain.
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