The level of inventory of a manufacturered product solution this question The level of inventory of a manufactured product has increased by 7,000 unitsduring a period. The following data are also available:Variable Fixed$6.00Unit manufacturing costs of the period $12.00Unit operating expenses of the period 4.001.50What would be the effect on income from operations if absorption costing isused rather than variable coding?a. $42,000 decreaseb. $42,000 increasec. $62,500 increased. $52,500 decrease

Step 1:Concept: Under absorption costing, the fixed manufacturing overhead is considered as product…

Answered: The level of inventory of a…

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter10: Inventory

Section: Chapter Questions

Problem 1PB: When prices are falling (deflation), which costing method would produce the highest gross margin for...

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Contribution margin, break-even sales, cost-volume-profit chart, margin of safety, and operating leverage Belmain Co. expects to maintain the same inventories at the end of 20Y7 as at the beginning of the year. The total of all production costs for the year is therefore assumed to be equal to the cost of goods sold. With this in mind, the various department heads were asked to submit estimates of the costs for their departments during the year. A summary report of these estimates is as follows: It is expected that 12,000 units will be sold at a price of 240 a unit. Maximum sales within the relevant range are 18,000 units. Instructions 1. Prepare an estimated income statement for 20Y7. 2. What is the expected contribution margin ratio? 3. Determine the break-even sales in units and dollars. 4. Construct a cost-volume-profit chart indicating the break-even sales. 5. What is the expected margin of safety in dollars and as a percentage of sales? (Round to one decimal place.) 6. Determine the operating leverage.
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If variable cost of goods sold totaled $101,100 for the year (16,850 units at $6 each) and the planned variable cost of goods sold totaled $109,680 (13,710 units at $8 each), the effect of the unit cost factor on the change in contribution margin is: a.$18,840 decrease b.$33,700 increase c.$33,700 decrease d.$18,840 increase
5. A company has £8.00 per unit in variable production cost and £3.00 per unit in variable selling and administrative cost. The annual fixed production cost is £300,000. The annual fixed selling and administrative cost is £50,000. a. Complete the table below for the number of units and dollar value of ending inventory for each year. Assume a FIFO flow. Units Produced Units Sold Units in ending inventory Ending inventory using variable costing Ending inventory using full costing b. 2004 120,000 110,000 2005 150,000 120,000 2006 100,000 140,000 2007 100,000 100,000 Assume that the selling price and cost structure stayed the same over the 4-year period. How would the total income compare over the period between variable and full costing?
The following income statement applies to Franklin Company for the current year: Income Statement Sales revenue (410 units × $31) Variable cost (410 units × $16) Contribution margin Fixed cost Net income Required a. Use the contribution margin approach to calculate the magnitude of operating leverage. b. Use the operating leverage measure computed in Requirement a to determine the amount of net income that Franklin Company will earn If It experiences a 10 percent increase in revenue. The sales price per unit is not affected. c-1. Verify your answer to Requirement b by constructing an income statement based on a 10 percent increase in sales revenue. The sales price is not affected. c-2. Calculate the percentage change in net income for the two income statements. Req A and B Complete this question by entering your answers in the tabs below. Req C1 a. Operating leverage b. Net income $ $12,710 (6,560) 6,150 (4,100) $2,050 > Answer is complete but not entirely correct. Req C2 a. Use the…
Sales (18,00e units) Variable expenses Contribution margin Fixed expenses $ 368,008 144,e00 216,eee 188,eee $ 36,000 Operating incone Required: Answer each question Independently based on the original data: 1. What is the product's CM ratio? 2 Use the CM ratio to determine the break-even polnt in sales dollars.
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If variable cost of goods sold totaled $98,094 for the year (16,349 units at $6 each) and the planned variable cost of goods sold totaled $109,064 (13,633 units at $8 each), the effect of the quantity factor on the change in contribution margin is: a.$16,296 decrease b.$21,728 decrease c.$16,296 increase d.$21,728 increase
Smithen Company, a wholesale distributor, has been operating for only a few months. The company sells three products-sinks, mirrors, and vanities. Budgeted sales by product and in total for the coming month are shown below based on planned unit sales as follows: Sinks Mirrors Vanities Total Units 1,000 500 500 2,000 Percentage of total sales Sales Variable expenses Contribution margin Contribution margin per unit Fixed expenses Operating income Break-even point in unit sales: Percentage sex 25% 25% 100% Break-even point in sales dollars: Total Fixed expenses. Weighted-average CM per unit Sinks 48% Product Mirrors 20% $264,000 100.00% $110,000 100.00% $176,000 100.00% $550,000 100.00% 80,000 30.30% 72,000 65.45% 82,000 46.59% 219,300 39.87% 53.41% 60.13% $184,000 $ 94,000 330,700 69.70% 38,000 34.55% S 76.00 $ 184.00 $ 188.00 Fixed expenses Overall CM ratio $293,300 $158.00 Vanities 32% $293,300 0.60 1,856.33 units Total 100% 293,300 $ 37,400 = $487,798.61 *($184.00 0.50) + ($76.00 x…

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