Harris & Martin Industries makes artificial Christmas trees. The unit costs for producing a tree are: Direct materials Direct labor Variable overhead Fixed overhead $24 $15 $17 $5 The company also incurs $2 per tree in variable selling and administrative costs and $3,900 in fixed marketing costs. At the beginning of the year, the company had 900 trees in the beginning Finished Goods Inventory. The company produced 2,180 trees during the year. Sales totaled 1,800 trees at a price of $102 per tree. (a) Based on absorption costing, what was the company's operating income for the year? Company's operating income $ (b) Based on variable costing, what was the company's operating income for the year? Company's operating income $ (c) Assume that in the following year the company produced 2,180 trees and sold 2,540. Based on absorption costing, what was the operating income for that year? Based on variable costing, what was the operating income for that year?
Harris & Martin Industries makes artificial Christmas trees. The unit costs for producing a tree are: Direct materials Direct labor Variable overhead Fixed overhead $24 $15 $17 $5 The company also incurs $2 per tree in variable selling and administrative costs and $3,900 in fixed marketing costs. At the beginning of the year, the company had 900 trees in the beginning Finished Goods Inventory. The company produced 2,180 trees during the year. Sales totaled 1,800 trees at a price of $102 per tree. (a) Based on absorption costing, what was the company's operating income for the year? Company's operating income $ (b) Based on variable costing, what was the company's operating income for the year? Company's operating income $ (c) Assume that in the following year the company produced 2,180 trees and sold 2,540. Based on absorption costing, what was the operating income for that year? Based on variable costing, what was the operating income for that year?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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Transcribed Image Text:Harris & Martin Industries makes artificial Christmas trees. The unit costs for producing a tree are:
Direct materials
Direct labor
Variable overhead
Fixed overhead
$24
$15
$17
$5
The company also incurs $2 per tree in variable selling and administrative costs and $3,900 in fixed marketing costs.
At the beginning of the year, the company had 900 trees in the beginning Finished Goods Inventory. The company produced 2,180
trees during the year. Sales totaled 1,800 trees at a price of $102 per tree.
(a) Based on absorption costing, what was the company's operating income for the year?
Company's operating income $
(b) Based on variable costing, what was the company's operating income for the year?
Company's operating income $
(c) Assume that in the following year the company produced 2,180 trees and sold 2,540. Based on absorption costing, what was the
operating income for that year? Based on variable costing, what was the operating income for that year?
Transcribed Image Text:At the beginning of the year, the company had 900 trees in the beginning Finished Goods Inventory. The company produced 2,180
trees during the year. Sales totaled 1,800 trees at a price of $102 per tree.
(a) Based on absorption costing, what was the company's operating income for the year?
Company's operating income $
(b) Based on variable costing, what was the company's operating income for the year?
Company's operating income $
(c) Assume that in the following year the company produced 2,180 trees and sold 2,540. Based on absorption costing, what was the
operating income for that year? Based on variable costing, what was the operating income for that year?
Operating income
$
Absorption Costing
Variable Costing
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