Question 2: Variable costing and absorption costing Details of a company's first two years of operations are shown: Year 1 Sales @ £25 Opening stock in units Units produced Units sold Fixed selling administrative expenses Direct materials Direct labour £1,000,000 0 and £110,000 The company's unit product cost is computed as follows: (£180,000/45,000 units) Unit product cost 45000 40000 Variable manufacturing overhead Fixed manufacturing overhead Year 2 £1,250,000 5000 45000 50000 £110,000 £ 4 7 4 16 Required: a) Prepare a profit and loss account for each year using Absorption costing. b) Using the profit under Absorption costing, calculate what the profit would be each year if the company used Marginal costing. c) Why is Marginal costing which is used by Management accounting incompatible with Financial accounting?

Question 2: Variable costing and absorption costing Details of a company's first two years of operations are shown: Year 1 Sales @ £25 Opening stock in units Units produced Units sold Fixed selling administrative expenses Direct materials Direct labour £1,000,000 0 and £110,000 The company's unit product cost is computed as follows: (£180,000/45,000 units) Unit product cost 45000 40000 Variable manufacturing overhead Fixed manufacturing overhead Year 2 £1,250,000 5000 45000 50000 £110,000 £ 4 7 4 16 Required: a) Prepare a profit and loss account for each year using Absorption costing. b) Using the profit under Absorption costing, calculate what the profit would be each year if the company used Marginal costing. c) Why is Marginal costing which is used by Management accounting incompatible with 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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During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Sales (@ $62 per unit) Year 1 $ 1,178,000 Gross margin 513,000 Selling and administrative 303,000 expenses* Net operating $ income Cost of goods sold (@$35 665,000 1,015,000 per unit) Year 2 210,000 $ 1,798,000 783,000 333,000 $ 450,000 *$3 per unit variable; $246,000 fixed each year. The company's $35 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($360,000 ÷ 24,000 units) Absorption costing unit product cost $9 9 2 15 $ 35
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Dowell Company produces a single product. Its Income under variable costing for its first two years of operation follow. Variable Costing Income Income Units Units produced Units sold Additional Information a. Sales and production data for these first two years follow. Year 1 $ 43,000 Year 1 44,300 33,000 Direct materials Direct labor Variable overhead Fixed overhead ($430,000/43,000 units) Total product cost per unit Variable costing income Year 2 b. The company's $32 per unit product cost (for both years) using absorption costing consists of the following. Absorption costing income 44,300 55,600 Year 2 $ 610,000 Required: Prepare a statement to convert variable costing income to absorption costing income for both years. (Leave no cells blank - be certain to enter "0" wherever required.) $6 Dowell Company Convert Variable Costing Income to Absorption Costing Income Year 1 $ 9 7 10 $32 43,000 $ Year 2 610,000
Table 2Activity Cost Pool Total Cost Total ActivityAssembly $ 1,114,920 57,000 machine-hoursProcessing orders $ 47,016 1,800 ordersInspection $ 107,328 1,560 inspection-hours Use Table 2 to answer this question. XYZ Corporation has provided the following data from its activity-based costing system (Table 2). The company makes 430 units of product ABA a year, requiring a total of 1,120 machine-hours, 35 orders, and 40 inspection-hours per year. The product's direct materials cost is $49.81 per unit and its direct labor cost is $12.34 per unit. The product sells for $130 per unit. According to the activity-based costing system, the product margin for product ABA is: Select one: a. $4,290.10. b. $3,815.50. c. none of the given answer. d. $4,159.50. e. $3,602.10.
PROBLEM 2. The management of B Company uses the following unit costs for the one product it manufactures Projected Cost Per Unit Direct Materials P30.00 Direct Labor 19.00 Variable Overhead 6.00 Fixed overhead (based on 10,000 units per month) 5.00 Variable selling and administrative Fixed selling and administrative (based on 10,000 units per month) 4.00 2.80 Units Beginning Inventory 2,000 Production 9,000 Available 11,000 Sales 7,500 Ending Inventory 3,500 REQUIRED: prepare projected income statements for June 2018 for management purposes under each of the following product costing methods: 1. Absorption costing with all variances charged to cost of goods sold for each month. 2. Direct (variable) costing 3. Supporting schedules calculating inventoriable production costs per unit. Ignore income taxes.
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Units in beginning inventory 0 Units produced 18,000 Units sold 15,000 Units in ending inventory 3,000 Variable costs per unit: Direct materials $ 270 Direct labor $ 380 Variable manufacturing overhead $ 48 Variable selling and administrative $ 21 Fixed costs: Fixed manufacturing overhead $ 650,000 Fixed selling and administrative $ 480,000 1.Absorption costing unit product cost: 2.Variable costing unit product cost:
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