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manufactures tactical LED eporting purposes; however nd actual operations for 20:

manufactures tactical LED eporting purposes; however nd actual operations for 20:

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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Outback Corporation manufactures tactical LED flashlights in Brisbane, Australia. The firm uses an absorption costing system for internal reporting purposes; however, the company is considering using variable costing. Data regarding Outback's planned and actual operations for 20x1 follow: Budgeted Costs Per Unit Total Actual Costs Direct material Direct labor $1,687,500 1,323,000 607,500 12.50 $1,562,500 9.80 Variable manufacturing overhead Fixed manufacturing overhead Variable selling expenses Fixed selling expenses Variable administrative expenses Fixed administrative expenses 1,225,000 562,500 671,500 877,500 972,000 292,500 4.50 4.90 661,500 1,012,500 972,000 337,500 7.50 7.20 2.50 2.20 297,000 305,000 Total 51.10 $6,898,500 $6,468,500 Planned Activity 36,000 135,000 135,000 Actual Activity Beginning finished-goods inventory in units Sales in units 36,000 117,000 125,000 Production in units The budgeted per-unit cost figures were based on Outback producing and selling 135,000 units in 20x1. Outback uses a predetermined overhead rate for applying manufacturing overhead to its product. A total manufacturing overhead rate of $9.40 per unit was employed for absorption costing purposes in 20x1. Any overapplied or underapplied manufacturing overhead is closed to the Cost of Goods Sold account at the end of the year. The 20x1 beginning finished-goods inventory for absorption costing purposes was valued at the 20x0 budgeted unit manufacturing cost, which was the same as the 20x1 budgeted unit manufacturing cost. There are no work-in- process inventories at either the beginning or the end of the year. The planned and actual unit selling price for 20x1 was $70.90 per unit. Required: Was Outback's 20x1 operating income higher under absorption costing or variable costing? Also, compute the following: 1. The value of Outback Corporation's 20x1 ending finished-goods inventory under absorption costing. 2. The value of Outback Corporation's 20x1 ending finished-goods inventory under variable costing. 3. The difference between Outback Corporation's 20x1 reported operating income calculated under absorption costing and calculated under variable costing. Complete this question by entering your answers in the tabs below. Operating Income Required 1 Required 2 Required 3 Was Outback's 20x1 operating income higher under absorption costing or variable costing? Olt was higher under variable costing. Olt was higher under absorption costing. Operating Income Required 1 >
Transcribed Image Text:Outback Corporation manufactures tactical LED flashlights in Brisbane, Australia. The firm uses an absorption costing system for internal reporting purposes; however, the company is considering using variable costing. Data regarding Outback's planned and actual operations for 20x1 follow: Budgeted Costs Per Unit Total Actual Costs Direct material Direct labor $1,687,500 1,323,000 607,500 12.50 $1,562,500 9.80 Variable manufacturing overhead Fixed manufacturing overhead Variable selling expenses Fixed selling expenses Variable administrative expenses Fixed administrative expenses 1,225,000 562,500 671,500 877,500 972,000 292,500 4.50 4.90 661,500 1,012,500 972,000 337,500 7.50 7.20 2.50 2.20 297,000 305,000 Total 51.10 $6,898,500 $6,468,500 Planned Activity 36,000 135,000 135,000 Actual Activity Beginning finished-goods inventory in units Sales in units 36,000 117,000 125,000 Production in units The budgeted per-unit cost figures were based on Outback producing and selling 135,000 units in 20x1. Outback uses a predetermined overhead rate for applying manufacturing overhead to its product. A total manufacturing overhead rate of $9.40 per unit was employed for absorption costing purposes in 20x1. Any overapplied or underapplied manufacturing overhead is closed to the Cost of Goods Sold account at the end of the year. The 20x1 beginning finished-goods inventory for absorption costing purposes was valued at the 20x0 budgeted unit manufacturing cost, which was the same as the 20x1 budgeted unit manufacturing cost. There are no work-in- process inventories at either the beginning or the end of the year. The planned and actual unit selling price for 20x1 was $70.90 per unit. Required: Was Outback's 20x1 operating income higher under absorption costing or variable costing? Also, compute the following: 1. The value of Outback Corporation's 20x1 ending finished-goods inventory under absorption costing. 2. The value of Outback Corporation's 20x1 ending finished-goods inventory under variable costing. 3. The difference between Outback Corporation's 20x1 reported operating income calculated under absorption costing and calculated under variable costing. Complete this question by entering your answers in the tabs below. Operating Income Required 1 Required 2 Required 3 Was Outback's 20x1 operating income higher under absorption costing or variable costing? Olt was higher under variable costing. Olt was higher under absorption costing. Operating Income Required 1 >
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