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The accounting team at Novak is considering its options for reporting performance at the end of this year. Novak specializes in mylar balloons, which it sells for $0.77 each. Novak has used only absorption costing within its standard costing system, but management team members feel uneasy about Novak's most recent year's modest income (despite higher-volume sales than the previous year). They wonder if there is a different way to put the financial statements together that would provide a more consistent-and perhaps conservative-presentation of performance. Some people on the accounting team have experience with variable costing, so they suggest putting together a side-by-side comparison of both costing systems for the past two years in order to compare the results. Following are the budgeted costs and budgeted production that were in place for both years, along with actual volume information for each year. Budgeted Information for Both Years Direct materials Direct labor Variable-MOH Variable selling expense Fixed-MOH Fixed selling and administrative expenses Budgeted production volume $0.09 per unit $0.09 per unit $0.05 per unit $0.05 per unit $19,248 $28,400 120,300 units

The accounting team at Novak is considering its options for reporting performance at the end of this year. Novak specializes in mylar balloons, which it sells for $0.77 each. Novak has used only absorption costing within its standard costing system, but management team members feel uneasy about Novak's most recent year's modest income (despite higher-volume sales than the previous year). They wonder if there is a different way to put the financial statements together that would provide a more consistent-and perhaps conservative-presentation of performance. Some people on the accounting team have experience with variable costing, so they suggest putting together a side-by-side comparison of both costing systems for the past two years in order to compare the results. Following are the budgeted costs and budgeted production that were in place for both years, along with actual volume information for each year. Budgeted Information for Both Years Direct materials Direct labor Variable-MOH Variable selling expense Fixed-MOH Fixed selling and administrative expenses Budgeted production volume $0.09 per unit $0.09 per unit $0.05 per unit $0.05 per unit $19,248 $28,400 120,300 units

FINANCIAL ACCOUNTING
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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The accounting team at Novak is considering its options for reporting performance at the end of this year. Novak specializes in mylar balloons, which it sells for $0.77 each. Novak has used only absorption costing within its standard costing system, but management team members feel uneasy about Novak's most recent year's modest income (despite higher-volume sales than the previous year). They wonder if there is a different way to put the financial statements together that would provide a more consistent and perhaps conservative presentation of performance. Some people on the accounting team have experience with variable costing, so they suggest putting together a side-by-side comparison of both costing systems for the past two years in order to compare the results. Following are the budgeted costs and budgeted production that were in place for both years, along with actual volume information for each year. Budgeted Information for Both Years Direct materials Direct labor Variable-MOH Variable selling expense Fixed-MOH Fixed selling and administrative expenses Budgeted production volume $0.09 per unit $0.09 per unit $0.05 per unit $0.05 per unit $19,248 $28,400 120,300 units
Transcribed Image Text:The accounting team at Novak is considering its options for reporting performance at the end of this year. Novak specializes in mylar balloons, which it sells for $0.77 each. Novak has used only absorption costing within its standard costing system, but management team members feel uneasy about Novak's most recent year's modest income (despite higher-volume sales than the previous year). They wonder if there is a different way to put the financial statements together that would provide a more consistent and perhaps conservative presentation of performance. Some people on the accounting team have experience with variable costing, so they suggest putting together a side-by-side comparison of both costing systems for the past two years in order to compare the results. Following are the budgeted costs and budgeted production that were in place for both years, along with actual volume information for each year. Budgeted Information for Both Years Direct materials Direct labor Variable-MOH Variable selling expense Fixed-MOH Fixed selling and administrative expenses Budgeted production volume $0.09 per unit $0.09 per unit $0.05 per unit $0.05 per unit $19,248 $28,400 120,300 units
Actual Activity Units produced Beginning FG Inventory (units) Units sold (a1) Year 1 124,400 2,500 116,900 Year 2 113,900 10,000 121,300 There were no price or efficiency varices for either year. Company policy is to write off any fixed-MOH volume variance directly to COGS in the year incurred. Report the unit cost that would be capitalized as inventory under variable costing. Show the FG Inventory section of the balance sheet at the end of each year. (Round inventory cost per unit to 2 decimal places, eg. 15.25) Year 1 Show Transcribed Text Year 2 Report the unit cost that would be capitalized as inventory under variable costing. Show the FG Inventory section of the balance sheet at the end of each year. (Round inventory cost per unit to 2 decimal places, eg. 15.25) Year 1 $ Year 2
Transcribed Image Text:Actual Activity Units produced Beginning FG Inventory (units) Units sold (a1) Year 1 124,400 2,500 116,900 Year 2 113,900 10,000 121,300 There were no price or efficiency varices for either year. Company policy is to write off any fixed-MOH volume variance directly to COGS in the year incurred. Report the unit cost that would be capitalized as inventory under variable costing. Show the FG Inventory section of the balance sheet at the end of each year. (Round inventory cost per unit to 2 decimal places, eg. 15.25) Year 1 Show Transcribed Text Year 2 Report the unit cost that would be capitalized as inventory under variable costing. Show the FG Inventory section of the balance sheet at the end of each year. (Round inventory cost per unit to 2 decimal places, eg. 15.25) Year 1 $ Year 2
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