iculates incon tion costing. company to managers based oH operating of the division. In

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Big Pros Inc. calculates income under absorption costing. The company provides bonuses to managers based on the operating income of the division. In 2021,
the Body division has the following financial results:
4 Sales (50,000 units)
6,000,000
5 Cost of Goods Sold
Opening Inventory
Cost of Goods Manufactured (60,000 units)
7
8
Variable Costs
1,500,000
Fixed Costs
1,500,000
10
11 Ending Inventory
3,000,000
500,000
12 COGS
13 Gross Margin
14 Selling and Admin Expenses
15
16
17
18 Operating Income
19
2$
2,500,000
3,500,000
Variable
500,000
Fixed
800,000
1,300,000
2,200,000
20 The old manager for the Body division left in early 2021. A new manager was hired in 2022. The new manager produced 55,000 units and sold 58,000 units in 2022.
21
22 REQUIRED
23 A) Calculate the operating income for 2022 using absorption costing. Use an income statement to show your work.
24 B) Calculate the operating income for 2022 using variable costing. Do not use an income statement as part of your calculation.
Transcribed Image Text:1 Question 2 Big Pros Inc. calculates income under absorption costing. The company provides bonuses to managers based on the operating income of the division. In 2021, the Body division has the following financial results: 4 Sales (50,000 units) 6,000,000 5 Cost of Goods Sold Opening Inventory Cost of Goods Manufactured (60,000 units) 7 8 Variable Costs 1,500,000 Fixed Costs 1,500,000 10 11 Ending Inventory 3,000,000 500,000 12 COGS 13 Gross Margin 14 Selling and Admin Expenses 15 16 17 18 Operating Income 19 2$ 2,500,000 3,500,000 Variable 500,000 Fixed 800,000 1,300,000 2,200,000 20 The old manager for the Body division left in early 2021. A new manager was hired in 2022. The new manager produced 55,000 units and sold 58,000 units in 2022. 21 22 REQUIRED 23 A) Calculate the operating income for 2022 using absorption costing. Use an income statement to show your work. 24 B) Calculate the operating income for 2022 using variable costing. Do not use an income statement as part of your calculation.
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