Santana Rey expects sales of Business Solutions' line of computer workstation furniture to equal 300 workstations (at a sales price of $3,400 each) for 2021. The workstations' manufacturing costs include the following. Direct materials Direct labor Variable overhead Fixed overhead $700 per unit $380 per unit $80 per unit $ 24,000 per year Selling and administrative expenses for these workstations follow. $ 40 per unit $ 3,700 per year Variable Fixed Santana is considering how many workstations to produce in 2021. She is confident that she will be able to sell any workstations in her 2021 ending inventory during 2022. However, Santana does not want to overproduce as she does not have sufficient storage space for many more workstations. Required: 1. Complete the following income statements using absorption costing. 2. Complete the following income statements using variable costing. 3. Which costing method, absorption or variable, yields the higher income when 320 workstations are produced and 300 are sold? Required 1 Required 2 Required 3 Complete the following income statements using absorption costing. Product cost per unit - Absorption costing Product cost per unit - Absorption costing Number of workstations sold Total cost of goods sold BUSINESS SOLUTIONS Income Statements (Absorption Costing) Sales volume - 300 Workstations Production volume 300 320 workstations workstations Production volume 300 320 workstations workstations
Santana Rey expects sales of Business Solutions' line of computer workstation furniture to equal 300 workstations (at a sales price of $3,400 each) for 2021. The workstations' manufacturing costs include the following. Direct materials Direct labor Variable overhead Fixed overhead $700 per unit $380 per unit $80 per unit $ 24,000 per year Selling and administrative expenses for these workstations follow. $ 40 per unit $ 3,700 per year Variable Fixed Santana is considering how many workstations to produce in 2021. She is confident that she will be able to sell any workstations in her 2021 ending inventory during 2022. However, Santana does not want to overproduce as she does not have sufficient storage space for many more workstations. Required: 1. Complete the following income statements using absorption costing. 2. Complete the following income statements using variable costing. 3. Which costing method, absorption or variable, yields the higher income when 320 workstations are produced and 300 are sold? Required 1 Required 2 Required 3 Complete the following income statements using absorption costing. Product cost per unit - Absorption costing Product cost per unit - Absorption costing Number of workstations sold Total cost of goods sold BUSINESS SOLUTIONS Income Statements (Absorption Costing) Sales volume - 300 Workstations Production volume 300 320 workstations workstations Production volume 300 320 workstations workstations
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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Transcribed Image Text:Santana Rey expects sales of Business Solutions' line of computer workstation furniture to equal 300 workstations (at a sales price of
$3,400 each) for 2021. The workstations' manufacturing costs include the following.
Direct materials
Direct labor
Variable overhead
Fixed overhead
$700 per unit
$380 per unit
$80 per unit
$24,000 per year
Selling and administrative expenses for these workstations follow.
$40 per unit
$3,700 per year
Variable
Fixed
Santana is considering how many workstations to produce in 2021. She is confident that she will be able to sell any workstations in her
2021 ending inventory during 2022. However, Santana does not want to overproduce as she does not have sufficient storage space
for many more workstations.
Required:
1. Complete the following income statements using absorption costing.
2. Complete the following income statements using variable costing.
3. Which costing method, absorption or variable, yields the higher income when 320 workstations are produced and 300 are sold?
Required 1 Required 2 Required 3
Complete the following income statements using absorption costing.
Product cost per unit - Absorption costing
Product cost per unit - Absorption costing
Number of workstations sold
Total cost of goods sold
BUSINESS SOLUTIONS
Income Statements (Absorption Costing)
Sales volume - 300 Workstations
Production volume
300
320
workstations workstations
Production volume
300
320
workstations workstations
Transcribed Image Text:BUSINESS SOLUTIONS
Income Statements (Variable Costing)
Production volume (units)
Sales volume (units)
Required 1 Required 2
Required 3
300
workstations
Which costing method, absorption or variable, yields the higher income
when 320 workstations are produced and 300 are sold?
< Required 2
Which costing method, absorption or variable, yields the higher income when 320 workstations are produced and 300 are
sold?
320
workstations
Absorption costing method
Variable costing method
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