LoneStar Co. is a manufacturing company that produces only one product, cowboy boots, has provided the following data concerning its operations in 2019 and 2020: 2019 was the company's first year of operations. In 2019 the company produced 1,000 pairs of cowboy boots and sold 900 pairs. The company sold boots at $250 a pair. The company incurred the following costs in 2019: direct materials of $70 a pair, direct labor costs of $20 a pair, variable selling and administrative of $5 a pair, variable manufacturing overhead of $10 a pair, and fixed manufacturing overhead of $20,000. Lastly, they paid $50,000 for fixed selling and administrative expenses. In 2020, selling price and all costs remained the same except that direct material costs went up by $5 a pair. The company produced 2,000 pairs in 2020 and sold 1,500 pairs. LoneStar Co. uses FIFO inventory method (the oldest units are sold first). A. What is the unit product cost for 2019 and 2020 under variable costing? B. What is the unit product cost for 2019 and 2020 under absorption costing? C. What is the net operating income (NOI) for 2020 under variable costing? D. Under absorption costing, how much of 2019 FMOH cost was recognized in COGS in 2020? SHOW YOUR WORK. Briefly explain in words.
LoneStar Co. is a manufacturing company that produces only one product, cowboy boots, has provided the following data concerning its operations in 2019 and 2020: 2019 was the company's first year of operations. In 2019 the company produced 1,000 pairs of cowboy boots and sold 900 pairs. The company sold boots at $250 a pair. The company incurred the following costs in 2019: direct materials of $70 a pair, direct labor costs of $20 a pair, variable selling and administrative of $5 a pair, variable manufacturing overhead of $10 a pair, and fixed manufacturing overhead of $20,000. Lastly, they paid $50,000 for fixed selling and administrative expenses. In 2020, selling price and all costs remained the same except that direct material costs went up by $5 a pair. The company produced 2,000 pairs in 2020 and sold 1,500 pairs. LoneStar Co. uses FIFO inventory method (the oldest units are sold first). A. What is the unit product cost for 2019 and 2020 under variable costing? B. What is the unit product cost for 2019 and 2020 under absorption costing? C. What is the net operating income (NOI) for 2020 under variable costing? D. Under absorption costing, how much of 2019 FMOH cost was recognized in COGS in 2020? SHOW YOUR WORK. Briefly explain in words.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:LoneStar Co. is a manufacturing company that produces only one product, cowboy boots, has provided the following data
concerning its operations in 2019 and 2020:
2019 was the company's first year of operations. In 2019 the company produced 1,000 pairs of cowboy boots and sold 900 pairs.
The company sold boots at $250 a pair. The company incurred the following costs in 2019:
direct materials of $70 a pair,
direct labor costs of $20 a pair,
variable selling and administrative of $5 a pair,
variable manufacturing overhead of $10 a pair,
and fixed manufacturing overhead of $20,000.
Lastly, they paid $50,000 for fixed selling and administrative expenses.
In 2020, selling price and all costs remained the same except that direct material costs went up by $5 a pair. The company
produced 2,000 pairs in 2020 and sold 1,500 pairs. LoneStar Co. uses FIFO inventory method (the oldest units are sold first).
A. What is the unit product cost for 2019 and 2020 under variable costing?
B. What is the unit product cost for 2019 and 2020 under absorption costing?
C. What is the net operating income (NOI) for 2020 under variable costing?
D. Under absorption costing, how much of 2019 FMOH cost was recognized in COGS in 2020? SHOW YOUR WORK. Briefly
explain in words.
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