QUESTION 1A Johanna Stores produce and sell sunscreen powder called the 'Protect' in cases. Each case is sold for $80. The following information relates to the product in the first and second quarter of 2022. Sales Production Direct materials Direct labor Variable manufacturing overhead Fixed selling expenses Variable selling expenses Variable administrative expenses are 10% of sales value Fixed administrative expenses are 25% of sales value QUARTER 1 35,100 units 42,750 units $38,250 $64,125 QUARTER 2 53,550 units 45,900 units $4.80 per unit $4.70 per unit $2.50 per unit $38,250 $68,850 The budgeted production capacity for the year is 176,400 cases to be produced evenly throughout the year with a budgeted cost of $705,600. Assume that there will be no inventory held on January 1, 2022. Required: (1) Prepare profit statement for each of the two quarters using absorption and variable costing techniques. (2) Compute and reconcile the differences in the operating incomes of both techniques. (3) Comment on the differences in the operating income between both techniques.
QUESTION 1A Johanna Stores produce and sell sunscreen powder called the 'Protect' in cases. Each case is sold for $80. The following information relates to the product in the first and second quarter of 2022. Sales Production Direct materials Direct labor Variable manufacturing overhead Fixed selling expenses Variable selling expenses Variable administrative expenses are 10% of sales value Fixed administrative expenses are 25% of sales value QUARTER 1 35,100 units 42,750 units $38,250 $64,125 QUARTER 2 53,550 units 45,900 units $4.80 per unit $4.70 per unit $2.50 per unit $38,250 $68,850 The budgeted production capacity for the year is 176,400 cases to be produced evenly throughout the year with a budgeted cost of $705,600. Assume that there will be no inventory held on January 1, 2022. Required: (1) Prepare profit statement for each of the two quarters using absorption and variable costing techniques. (2) Compute and reconcile the differences in the operating incomes of both techniques. (3) Comment on the differences in the operating income between both techniques.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:QUESTION 1A
Johanna Stores produce and sell sunscreen powder called the 'Protect' in cases. Each case is sold for $80. The
following information relates to the product in the first and second quarter of 2022.
Sales
Production
Direct materials
Direct labor
Variable manufacturing overhead
Fixed selling expenses
Variable selling expenses
Variable administrative expenses are 10% of sales value
Fixed administrative expenses are 25% of sales value
QUARTER 1
35,100 units
42,750 units
$38,250
$64,125
QUARTER 2
53,550 units
45,900 units
$4.80 per unit
$4.70 per unit
$2.50 per unit
$38,250
$68,850
The budgeted production capacity for the year is 176,400 cases to be produced evenly throughout the year with a
budgeted cost of $705,600. Assume that there will be no inventory held on January 1, 2022.
Required:
(1) Prepare profit statement for each of the two quarters using absorption and variable costing techniques.
(2) Compute and reconcile the differences in the operating incomes of both techniques.
(3) Comment on the differences in the operating income between both techniques.
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Step 1: Definition of Absorption Costing
VIEWStep 2: Preparation of Income Statement Using Absorption Costing
VIEWStep 3: Preparation of Income Statement Using Variable Costing
VIEWStep 4: Excel Calculation Details for Absorption Costing
VIEWStep 5: Excel Calculation Details for Variable Costing
VIEWStep 6: Reconciliation Difference in Net Income
VIEWStep 7: Comment on Difference in Operating Income
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