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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.

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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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.
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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