Sierra Company incurs the following costs to produce and sell its only product. Variable costs per unit: Direct materials Direct labor 10 9. Variable manufacturing overhead Variable selling and administrative expenses Fixed costs per year: Fixed manufacturing overhead Fixed selling and administrative expenses 24 $ 4 $ 87,750 $ 315,000 During this year, 29,250 units were produced and 25,250 units were sold. The Finished Goods inventory account at the end of this year shows a balance of $84,000 for the 4,000 unsold units. Required: 1-a. Calculate this year's ending balance in Finished Goods inventory two ways-using variable costing and using absorption costing. 1-b. Does it appear that the company is using variable costing or absorption costing to assign costs to the 4,000 units in its Finished Goods inventory? 2. Assume that the company wishes to prepare this year's financial statements for its stockholders. a. Is Finished Goods inventory of $84,000 the correct amount to include on the balance sheet for external reporting purposes? b. What balance should be reported in the Finished Goods inventory account for external reporting purposes?

Sierra Company incurs the following costs to produce and sell its only product. Variable costs per unit: Direct materials Direct labor 10 9. Variable manufacturing overhead Variable selling and administrative expenses Fixed costs per year: Fixed manufacturing overhead Fixed selling and administrative expenses 24 $ 4 $ 87,750 $ 315,000 During this year, 29,250 units were produced and 25,250 units were sold. The Finished Goods inventory account at the end of this year shows a balance of $84,000 for the 4,000 unsold units. Required: 1-a. Calculate this year's ending balance in Finished Goods inventory two ways-using variable costing and using absorption costing. 1-b. Does it appear that the company is using variable costing or absorption costing to assign costs to the 4,000 units in its Finished Goods inventory? 2. Assume that the company wishes to prepare this year's financial statements for its stockholders. a. Is Finished Goods inventory of $84,000 the correct amount to include on the balance sheet for external reporting purposes? b. What balance should be reported in the Finished Goods inventory account for external reporting purposes?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Cc. 188.
Andretti Company has a single product called a Dak. The company normally produces and sells 81,000 Daks each year at a selling price of $64 per unit. The company’s unit costs at this level of activity are given below: Direct materials $ 7.50 Direct labor 10.00 Variable manufacturing overhead 3.50 Fixed manufacturing overhead 3.00 ($243,000 total) Variable selling expenses 2.70 Fixed selling expenses 4.00 ($324,000 total) Total cost per unit $ 30.70 A number of questions relating to the production and sale of Daks follow. Each question is independent. Required: 1-a. Assume that Andretti Company has sufficient capacity to produce 101,250 Daks each year without any increase in fixed manufacturing overhead costs. The company could increase its unit sales by 25% above the present 81,000 units each year if it were willing to increase the fixed selling expenses by $100,000. What is the financial advantage (disadvantage) of investing an…
During its first year of operations, the McCormick Company incurred the following manufacturing costs: Direct materials, $4 per unit, Direct labor, $2 per unit, Variable overhead, $3 per unit, and Fixed overhead, $256,000. The company produced 32,000 units, and sold 26,500 units, leaving 5,500 units in inventory at year-end. What is the value of ending inventory under absorption costing? Multiple Choice $44,000 $49,500 $93,500 $256,000 $305,500
Andretti Company has a single product called a Dak. The company normally produces and sells 84,000 Daks each year at a selling Each question is independent.price of $62 per unit A number of questions relating to the production and sale of Daks follow. The company's unit costs at this level of activity are given below:Direct materials $ 7.50 Direct labor 11.00 Variable manufacturing overhead 1.90 Fixed manufacturing overhead 5.00 ($420,000 total) Variable selling expenses 3.70 Fixed selling expenses 4.50 ($378,000 total) Total cost per unit $ 33.60 Required: 1-a. Assume that Andretti Company has sufficient capacity to produce 100,800 Daks each year without any increase in fixed manufacturing overhead costs. The company could increase its unit sales by 20% above the present 84,000 units each year if it were willing to increase the fixed selling expenses by $120,000. What is the financial advantage (disadvantage) of investing an additional $120,000 in fixed selling expenses? b. Would the…
Sheffield Corp. sells its product for $70 per unit. During 2016, it produced 60,000 units and sold 50,000 units (there was no beginning inventory). Costs per unit are: direct materials $15, direct labor $12, and variable overhead $1. Fixed costs are: $720,000 manufacturing overhead, and $90,000 selling and administrative expenses. The per-unit manufacturing cost under absorption costing is: a. $41 b. $28 c. $40 d. $27
DO NOT GIVE SOLUTION IN IMAGE
Andretti Company has a single product called a Dak. The company normally produces and sells 88,000 Daks each year at a selling price of $58 per unit. The company’s unit costs at this level of activity are given below: Direct materials $ 9.50 Direct labor 8.00 Variable manufacturing overhead 2.70 Fixed manufacturing overhead 8.00 ($704,000 total) Variable selling expenses 2.70 Fixed selling expenses 3.50 ($308,000 total) Total cost per unit $ 34.40 A number of questions relating to the production and sale of Daks follow. Each question is independent. Required: 1-a. Assume that Andretti Company has sufficient capacity to produce 123,200 Daks each year without any increase in fixed manufacturing overhead costs. The company could increase its unit sales by 40% above the present 88,000 units each year if it were willing to increase the fixed selling expenses by $150,000. What is the financial advantage (disadvantage) of investing an additional $150,000 in…
Andretti Company has a single product called a Dak. The company normally produces and sells 82,000 Daks each year at a selling price of $60 per unit. The company's unit costs at this level of activity are given below: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling expenses Fixed selling expenses Total cost per unit $ 9.50 10.00 3.50 7.00 ($574,000 total) 1.70 3.50 ($287,000 total) $ 35.20 A number of questions relating to the production and sale of Diks follow. Each question is independent. Required: 1-a. Assume that Andretti Company has sufficient capacity to produce 102,500 Daks each year without any increase in fixed manufacturing overhead costs. The company could increase its unit sales by 25% above the present 82,000 units each year if it were willing to increase the fixed selling expenses by $110,000. What is the financial advantage (disadvantage) of investing an additional $110,000 in fixed selling expenses? 1-b. Would…
Whipple Company has sales revenue of $585,000. Cost of goods sold before adjustment is $335,000. The company uses machine hours to allocate manufacturing overhead and estimated 10,450 machine hours would be used during the year. For the year, manufacturing overhead was under-allocated by $13,400. The company's actual manufacturing overhead is $91,000. What is the actual gross profit? Select one: a. $250,000 b. $159,000 c. $236,600 d. $104,400 e. $263,400