Riders Company computes net operating income under both the absorption costing approach and the variable costing approach. For a given year the absorption costing net operating income was greater than the variable costing net operating income. This fact suggests that: more units were produced during the year than were sold. more units were sold during the year than were produced. common costs were greater than variable costs for the year. variable manufacturing costs were less than fixed manufacturing costs

Riders Company computes net operating income under both the absorption costing approach and the variable costing approach. For a given year the absorption costing net operating income was greater than the variable costing net operating income. This fact suggests that: more units were produced during the year than were sold. more units were sold during the year than were produced. common costs were greater than variable costs for the year. variable manufacturing costs were less than fixed manufacturing costs

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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Compute the following: The amount of ending inventory reported under absorption costing method If the number of units is equal to its production of 1,200 units, the amount of ending inventory reported under absorption costing method If 1,350 units were sold instead, what would be the operating income under variable costing method?
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The following example illustrates how traditional cost accounting techniques could result in a misleading and inequitable division of costs between low-volume and high-volume products, and demonstrates that ABC may provide a more meaningful allocation of costs. Suppose that Cooplan manufactures four products, W, X, Y and Z. The direct labour cost per hour is $5. Other output and cost data for the period just ended are as follows. Number of production runs in the period Material cost Direct labour Machine per unit $4 Output units hours per unit hours per unit W 10 2 20 1 1 10 2 80 3 Y 100 5 20 1 1 100 5 80 3 14 Overhead costs 24 Expediting and scheduling costs Materials handling costs 9,100 7,700 Short-run variable costs 3,080 10,920 Set-up costs Required Prepare unit costs for each product using traditional costing and ABC.
Bent Tree incurred the following unit costs during the year: variable manufacturing cost, $27; fixed manufacturing cost, $10; variable marketing and administrative cost, $8; and fixed marketing and administrative cost, $6. During the year, Bent Tree produced 30,000 units and sold 25,000 units of product. The selling price was $67 per unit. What was Bent Tree's total gross margin?
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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…
Feldspar, Inc. started the year with 200 units in the Finished Goods Inventory account. It produced 600 units during the year and sold 800 units. If Feldspar uses variable costing, ________. A. its operating income will be the same as under absorption costing B. its operating income for the period will be lower than under absorption costing C. its operating income for the period will be higher than under absorption costing D. its value of ending Finished Goods Inventory reported in the balance sheet will be higher than under absorption costing
During Heaton Company's first two years of operations, the company reported absorption costing net operating income as follows: Year 2 $ 1,827,000 1,073,000 754,000 333,000 $ 421,000 Year 1 Sales (@ $63 per unit) Cost of goods sold (@ $37 per unit) Gross margin Selling and administrative expenses* Net operating income $1,197,000 703,000 494,000 303,000 $ 191,000 * $3 per unit variable; $246,000 fixed each year. The company's $37 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($456,000 - 24,000 units) Absorption costing unit product cost 9 8 1 19 $ 37 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 two years are: Units produced Units sold Year 1 24,000 19,000 Year 2 24,000 29,000 Required: 1. Prepare a variable costing contribution format income statement…
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