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FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Requirement 3. Is operating income higher under absorption costing or variable costing in January? In January, absorption costing operating income exceeds variable costing operating income.
Transcribed Image Text:Requirement 3. Is operating income higher under absorption costing or variable costing in January? In January, absorption costing operating income exceeds variable costing operating income.
Maria's Foods produces frozen meals that it sells for $6 each. The company computes a new monthly fixed manufacturing overhead allocation rate based on the planned number of meals to be produced that month. Assume all costs and production levels are exactly as planned. The following data are from Maria's Foods's first month in business: E (Click the icon to view the data.) Read the requirements Requirement 1. Compute the product cost per meal produced under absorption costing and under variable costing. (Round your answers to the nearest cent.) Absorption costing Variable costing - X Total product cost per meal 2.35 2 Data Table Requirement 2a. Prepare Maria's Foods's January income statement using absorption costing. Maria's Foods January 2018 Income Statement (Absorption Costing) Units produced and sold: Month Ended January 31, 2018 Sales 800 meals Net Sales Revenue 4800 Production 1,100 meals Cost of Goods Sold 1880 Variable manufacturing cost per meal $ 2 Gross Profit 2920 Sales commission cost per meal Selling and Administrative Costs 1250 Total fixed manufacturing overhead 385 Operating Income 1670 Total fixed selling and administrative costs 450 Requirement 2b. Prepare Maria's Foods's January income statement using variable costing. Print Done Maria's Foods Income Statement (Variable Costing) Month Ended January 31, 2018 Net Sales Revenue 4800 Variable Costs 2400 Contribution Margin 2400 Fixed Costs 835 Operating Income 1565
Transcribed Image Text:Maria's Foods produces frozen meals that it sells for $6 each. The company computes a new monthly fixed manufacturing overhead allocation rate based on the planned number of meals to be produced that month. Assume all costs and production levels are exactly as planned. The following data are from Maria's Foods's first month in business: E (Click the icon to view the data.) Read the requirements Requirement 1. Compute the product cost per meal produced under absorption costing and under variable costing. (Round your answers to the nearest cent.) Absorption costing Variable costing - X Total product cost per meal 2.35 2 Data Table Requirement 2a. Prepare Maria's Foods's January income statement using absorption costing. Maria's Foods January 2018 Income Statement (Absorption Costing) Units produced and sold: Month Ended January 31, 2018 Sales 800 meals Net Sales Revenue 4800 Production 1,100 meals Cost of Goods Sold 1880 Variable manufacturing cost per meal $ 2 Gross Profit 2920 Sales commission cost per meal Selling and Administrative Costs 1250 Total fixed manufacturing overhead 385 Operating Income 1670 Total fixed selling and administrative costs 450 Requirement 2b. Prepare Maria's Foods's January income statement using variable costing. Print Done Maria's Foods Income Statement (Variable Costing) Month Ended January 31, 2018 Net Sales Revenue 4800 Variable Costs 2400 Contribution Margin 2400 Fixed Costs 835 Operating Income 1565
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