Question:524CC uses absorption (full) costing and its direct competitor, FF usesvariable costing for internal decision-making purposes. Last year, bothcompanies reported the same production and sales volumes. Which istrue?A. If sales are 10,000 units and production 12,000 units, CC's netincome exceeds FF's.B. If sales are 10,000 units and production 10,000 units, FF's netincome exceeds CC's.C. If sales are 10,000 units and production 8,000 units, FF's net incomeexceeds CC's.D. If sales are 12,000 units and production 10,000 units, FF's netincome equals CC's.E. Unable to determine.

Explanation of Absorption Costing: This costing method includes all manufacturing costs—both fixed…

Answered: Question:524 CC uses absorption (full)…

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 4BE

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To determine the effect of different levels of production on the company’s income, move to cell B7 (Actual production). Change the number in B7 to the different production levels given in the table below. The first level, 100,000, is the current level. What happens to the operating income on both statements as production levels change? Enter the operating incomes in the following table. Does the level of production affect income under either costing method? Explain your findings.
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Using variable costing, what is the unit product cost for both years? 2. What is the variable costing net operating income in Year 1 and in Year 2? 3. Reconcile the absorption costing and the variable costing net operating income figures for each year.
Que. No. 1a. When production is greater than sales which method’s net operating income will be higher, AC or VC and why? Be precise and to the point in writing the answer. Que. No. 1b. Sharp Company manufactures a product for which the following data and information related to inventory is available. The company uses variable costing for internal management reports and absorption costing for external reports to the shareholders, creditors, and the government. The company has provided the following data:Year-1Year-2Year-3Inventories:Beginning (units)200160180Ending (units)160180220Variable Costing net operating income$1,080,400$1,032,400$996,400The company’s fixed manufacturing overhead per unit was constant at $650 for all the three years.Required: 1. Determine each year’s absorption costing net operating income. Present your answer in the form of a reconciliation report. (you must show all calculations)2. In year four, the company’s variable costing net operating income was $984,400…
Darmian Corp. production for the year equaled 21 000 units and sales reached 19 000 units. Would Pearson net income be higher under: a. Variable costing system b. Absorption costing system c. Fixed costing system d. Contribution costing system
Questions: a. What is the net income under variable costing method? b. What is the net income under absorption costing method?
Bacon Mfg. has provided the following information. Units produced Units sold Selling price per unit Total Manufacturing Costs: Variable Fixed I Total Selling and Administration Variable Fixed 2020 1,000 825 $20.00 2,000 3,000 825 3,000 2021 1,000 875 $20.00 2,000 3,000 875 3,000 What is the difference in operating income between absorption and variable costing for 2021? a. Absorption income is $1,250 greater than variable income. b. Absorption income is $1,250 less than variable income. C. Absorption income is $375 greater than variable income. d. Absorption income is $2,125 greater than variable income.
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Problem 4-19 (Algo) Varlable Costing Income Statement; Reconciliation [LO4-2, L04-3] During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Sales (@$63 per unit) Cost of goods sold (@ $35 per unit) Gross margin Selling and administrative expenses* Net operating income Year 1 $ 945,000 525,000 420,000 295,000 125,000 *$3 per unit variable: $250,000 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 20,000 units) Absorption costing unit product cost Units produced Units sold Year 1 Year 2 20,000 20,000 15,000 25,000 Year 2 $ 1,575,000 875,000 700,000 325,000 375,000 $ Forty percent of fixed manufacturing overhead consists of wages and salaries; the remainder consists of depreciation charges on production equipment and buildings. Production and cost data for the first two years of operations are: $6…
for the year using absorption costing and variable costing. Calculate the total product cost per unit produced under absorption costing and under variable costing. \table[[,\table[[Absorption], [costing]],\table[[Variable], [costing]]], [Total product cost per unit, 125, 95]] Calculate the operating income for the year using absorption costing. Absorption costing \table [[Net Sales Revenue], [55,100]] Cost of Goods Sold Gross Profit Fixed Selling and Administrative Expenses Operating Income Calculate the operating income for the year using variable costing. \table[[Variable costing], [Net Sales Revenue], [Variable Cost], [Contribution Margin], [Fixed Manufacturing Costs], [Fixed Selling and Administrative Expenses], [Operating Income]]

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