Scott Manufacturing makes only one product with total unit manufacturing costs of $59, of which $41 is variable. No units were on hand at the beginning of 2015. During 2015 and 2016, the only product manufactured was sold for $93 per unit, and the cost structure did not change. Scott uses the first-in, first-out inventory method and has the following production and sales for 2015 and 2016 Units Manufactured Units Sold 2015 120,000 90,000 2016 120,000 130,000 a. Prepare gross profit computations for 2015 and 2016 using absorption costing. Do not use negative signs with your answers. Absorption Costing 2015 2016 Sales Answer Answer Cost of goods sold: Beginning inventory Answer Answer Production Answer Answer Goods available Answer Answer Less: Ending inventory Answer Answer Cost of goods sold Answer Answer Gross profit Answer Answer b. Prepare gross profit computations for 2015 and 2016 using variable costing. Do not use negative signs with your answers. Variable Costing 2015 2016 Sales Answer Answer Variable cost of goods sold: Beginning inventory Answer Answer Production Answer Answer Goods available Answer Answer Less: Ending inventory Answer Answer Variable cost of goods sold Answer Answer Less: Fixed manufacturing costs Answer Answer Gross profit Answer Answer c. Explain how your answers illustrate the impact of differences between production and sales volumes on the gross profits reported each year under absorption and variable costing. Select the most appropriate statement. A.If production volume exceeds sales volume, the absorption costing gross profit will be higher than the variable costing gross profit. B. If sales volume exceeds production volume, the absorption costing gross profit will be higher than the variable costing gross profit. C. If production volume exceeds sales volume, the variable costing gross profit will be higher than the absorption costing gross profit. D. If sales volume exceeds production volume, the variable costing gross profit will be lower than the absorption costing gross profit.

Scott Manufacturing makes only one product with total unit manufacturing costs of $59, of which $41 is variable. No units were on hand at the beginning of 2015. During 2015 and 2016, the only product manufactured was sold for $93 per unit, and the cost structure did not change. Scott uses the first-in, first-out inventory method and has the following production and sales for 2015 and 2016 Units Manufactured Units Sold 2015 120,000 90,000 2016 120,000 130,000 a. Prepare gross profit computations for 2015 and 2016 using absorption costing. Do not use negative signs with your answers. Absorption Costing 2015 2016 Sales Answer Answer Cost of goods sold: Beginning inventory Answer Answer Production Answer Answer Goods available Answer Answer Less: Ending inventory Answer Answer Cost of goods sold Answer Answer Gross profit Answer Answer b. Prepare gross profit computations for 2015 and 2016 using variable costing. Do not use negative signs with your answers. Variable Costing 2015 2016 Sales Answer Answer Variable cost of goods sold: Beginning inventory Answer Answer Production Answer Answer Goods available Answer Answer Less: Ending inventory Answer Answer Variable cost of goods sold Answer Answer Less: Fixed manufacturing costs Answer Answer Gross profit Answer Answer c. Explain how your answers illustrate the impact of differences between production and sales volumes on the gross profits reported each year under absorption and variable costing. Select the most appropriate statement. A.If production volume exceeds sales volume, the absorption costing gross profit will be higher than the variable costing gross profit. B. If sales volume exceeds production volume, the absorption costing gross profit will be higher than the variable costing gross profit. C. If production volume exceeds sales volume, the variable costing gross profit will be higher than the absorption costing gross profit. D. If sales volume exceeds production volume, the variable costing gross profit will be lower than the absorption costing gross profit.

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

	Units Manufactured	Units Sold
2015	120,000	90,000
2016	120,000	130,000

a. Prepare gross profit computations for 2015 and 2016 using absorption costing.
Do not use negative signs with your answers.

Absorption Costing
	2015	2016
Sales	Answer	Answer
Cost of goods sold:
Beginning inventory	Answer	Answer
Production	Answer	Answer
Goods available	Answer	Answer
Less: Ending inventory	Answer	Answer
Cost of goods sold	Answer	Answer
Gross profit	Answer	Answer

b. Prepare gross profit computations for 2015 and 2016 using variable costing.
Do not use negative signs with your answers.

Variable Costing
	2015	2016
Sales	Answer	Answer
Variable cost of goods sold:
Beginning inventory	Answer	Answer
Production	Answer	Answer
Goods available	Answer	Answer
Less: Ending inventory	Answer	Answer
Variable cost of goods sold	Answer	Answer
Less: Fixed manufacturing costs	Answer	Answer
Gross profit	Answer	Answer

c. Explain how your answers illustrate the impact of differences between production and sales volumes on the gross profits reported each year under absorption and variable costing.
Select the most appropriate statement.

A.If production volume exceeds sales volume, the absorption costing gross profit will be higher than the variable costing gross profit.

B. If sales volume exceeds production volume, the absorption costing gross profit will be higher than the variable costing gross profit.

C. If production volume exceeds sales volume, the variable costing gross profit will be higher than the absorption costing gross profit.

D. If sales volume exceeds production volume, the variable costing gross profit will be lower than the absorption costing gross profit.

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