Nicky's Entrees produces frozen meals, which it sells for $9 each. The company uses the FIFO inventory costing method, and it computes a new monthly fixed manufacturing overhead rate based on the actual number of meals produced that month. All costs and production levels are exactly as planned. The following data are from the company's first two months in business: January February Sales 1,200 Meals 1,600 Meals Production 1,600 Meals 1,500 Meals Variable manufacturing expense per meal $3 $3 Sales commission expense per meal $1 $1 Total fixed manufacturing overhead $1,200 $1,200 Total fixed marketing and administrative expenses $800 $800 Requirements 1. Compute the product cost per meal produced under absorption costing and under variable costing. Do this first for January and then for February. 2. Prepare separate monthly income statements for January and for February, using the following: a. Absorption costing b. Variable costing. Requirement 1. Compute the product cost per meal produced under absorption costing and under variable costing. Do this first for January and then for February. January February Absorption Costing Variable Costing Absorption Costing Variable Costing Total product cost Requirement 2a. Prepare separate monthly income statements for January and for February, using absorption costing. Nicky's Entrees Income Statement (Absorption Costing) Month Ended January 31 February 28 Sales revenue Less: Cost of goods sold Gross profit Less: Operating Expenses Operating income Requirement 2b. Prepare Nicky's Entrees' January and February income statements using variable costing. Nicky's Entrees Contribution Margin Income Statement (Variable Costing) Month Ended January 31 February 28 Sales revenue Less: Variable Expenses Variable cost of goods sold Variable operating expenses Contribution margin Less: Fixed Expenses Fixed manufacturing overhead Fixed operating expenses Operating income
Nicky's Entrees produces frozen meals, which it sells for $9 each. The company uses the FIFO inventory costing method, and it computes a new monthly fixed manufacturing overhead rate based on the actual number of meals produced that month. All costs and production levels are exactly as planned. The following data are from the company's first two months in business: January February Sales 1,200 Meals 1,600 Meals Production 1,600 Meals 1,500 Meals Variable manufacturing expense per meal $3 $3 Sales commission expense per meal $1 $1 Total fixed manufacturing overhead $1,200 $1,200 Total fixed marketing and administrative expenses $800 $800 Requirements 1. Compute the product cost per meal produced under absorption costing and under variable costing. Do this first for January and then for February. 2. Prepare separate monthly income statements for January and for February, using the following: a. Absorption costing b. Variable costing. Requirement 1. Compute the product cost per meal produced under absorption costing and under variable costing. Do this first for January and then for February. January February Absorption Costing Variable Costing Absorption Costing Variable Costing Total product cost Requirement 2a. Prepare separate monthly income statements for January and for February, using absorption costing. Nicky's Entrees Income Statement (Absorption Costing) Month Ended January 31 February 28 Sales revenue Less: Cost of goods sold Gross profit Less: Operating Expenses Operating income Requirement 2b. Prepare Nicky's Entrees' January and February income statements using variable costing. Nicky's Entrees Contribution Margin Income Statement (Variable Costing) Month Ended January 31 February 28 Sales revenue Less: Variable Expenses Variable cost of goods sold Variable operating expenses Contribution margin Less: Fixed Expenses Fixed manufacturing overhead Fixed operating expenses Operating income
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter7: Variable Costing For Management
analysis
Section: Chapter Questions
Problem 2CMA: Chassen Company, a cracker and cookie manufacturer, has the following unit costs for the month of...
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Question
Nicky's Entrees produces frozen meals, which it sells for $9 each. The company uses the FIFO inventory costing method, and it computes a new monthly fixed manufacturing overhead rate based on the actual number of meals produced that month. All costs and production levels are exactly as planned. The following data are from the company's first two months in business:
January | February | |
Sales | 1,200 Meals | 1,600 Meals |
Production | 1,600 Meals | 1,500 Meals |
Variable manufacturing expense per meal | $3 | $3 |
Sales commission expense per meal | $1 | $1 |
Total fixed manufacturing overhead | $1,200 | $1,200 |
Total fixed marketing and administrative expenses | $800 | $800 |
Requirements
1.
|
Compute the product cost per meal produced under absorption costing and under variable costing. Do this first for January and then for February.
|
2.
|
Prepare separate monthly income statements for January and for February, using the following:
a. Absorption costing
b. Variable costing.
|
Requirement 1. Compute the product cost per meal produced under absorption costing and under variable costing. Do this first for January and then for February.
|
January
|
February | ||
|
Absorption Costing
|
Variable Costing
|
Absorption Costing
|
Variable Costing
|
Total product cost
|
|
|
|
|
Requirement 2a. Prepare separate monthly income statements for January and for February, using absorption costing.
Nicky's Entrees
|
Income Statement (Absorption Costing)
|
Month Ended
|
|
January 31
|
February 28
|
Sales revenue
|
|
|
Less: Cost of goods sold
|
|
|
Gross profit
|
|
|
Less: Operating Expenses
|
|
|
Operating income
|
|
Requirement 2b. Prepare Nicky's Entrees' January and February income statements using variable costing.
Nicky's Entrees
|
Contribution Margin Income Statement (Variable Costing)
|
Month Ended
|
|
January 31
|
February 28
|
||
Sales revenue
|
|
|
||
Less: Variable Expenses
|
|
|||
Variable cost of goods sold
|
|
|||
Variable operating expenses
|
|
|||
Contribution margin
|
|
|||
Less: Fixed Expenses
|
|
|
||
Fixed manufacturing overhead
|
|
|
||
Fixed operating expenses
|
|
|
||
Operating income
|
|
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