Trez Company began operations this year. During this year, the company produced 100,000 units and sold 80,000 units. The absorption costing income statement for this year follows. Income Statement (Absorption Costing) Sales (80,000 units x $40 per unit) Cost of goods sold Gross profit Selling and administrative expenses Income $ 3,200,000 1,600,000 1,600,000 560,000 $ 1,040,000 Additional Information a. Selling and administrative expenses consist of $400,000 in annual fixed expenses and $2 per unit in variable selling and administrative expenses. b. The company's product cost of $20 per unit consists of the following. Direct materials Direct labor Variable overhead Fixed overhead ($700,000/ 100,000 units) $5 per unit $5 per unit $3 per unit $7 per unit Required: Prepare an income statement for the company under variable costing.

Trez Company began operations this year. During this year, the company produced 100,000 units and sold 80,000 units. The absorption costing income statement for this year follows. Income Statement (Absorption Costing) Sales (80,000 units x $40 per unit) Cost of goods sold Gross profit Selling and administrative expenses Income $ 3,200,000 1,600,000 1,600,000 560,000 $ 1,040,000 Additional Information a. Selling and administrative expenses consist of $400,000 in annual fixed expenses and $2 per unit in variable selling and administrative expenses. b. The company's product cost of $20 per unit consists of the following. Direct materials Direct labor Variable overhead Fixed overhead ($700,000/ 100,000 units) $5 per unit $5 per unit $3 per unit $7 per unit Required: Prepare an income statement for the company under variable costing.

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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During Heaton Company’s first two years of operations, it reported absorption costing net operating income as follows: Year 1 Year 2 Sales (@ $61 per unit) $ 1,159,000 $ 1,769,000 Cost of goods sold (@ $34 per unit) 646,000 986,000 Gross margin 513,000 783,000 Selling and administrative expenses* 305,000 335,000 Net operating income $ 208,000 $ 448,000 * $3 per unit variable; $248,000 fixed each year. The company’s $34 unit product cost is computed as follows: Direct materials $ 7 Direct labor 13 Variable manufacturing overhead 2 Fixed manufacturing overhead ($288,000 ÷ 24,000 units) 12 Absorption costing unit product cost $ 34 Production and cost data for the first two years of operations are: Year 1 Year 2 Units produced 24,000 24,000 Units sold 19,000 29,000 Required: 1. Using variable costing, what is the unit product cost for both years? 2. What is the variable costing net operating income in Year 1 and in Year 2? 3. Reconcile the…
Saxon, Inc. Absorption Costing Income Statement For the Year Ended December 31 1 Sales $1,125,000.00 2 Cost of goods sold: 3 Beginning inventory $0.00 4 Cost of goods manufactured 840,000.00 5 Ending inventory (210,000.00) 6 Total cost of goods sold 630,000.00 7 Gross profit $495,000.00 8 Selling and administrative expenses 275,000.00 9 Income from operations $220,000.00 Saxon, Inc. Variable Costing Income Statement For the Year Ended December 31 1 Sales $1,125,000.00 2 Variable cost of goods sold: 3 Beginning inventory $0.00 4 Variable cost of goods manufactured 600,000.00 5 Ending inventory (150,000.00) 6 Total variable cost of goods sold 450,000.00 7 Manufacturing margin $675,000.00 8 Variable selling and administrative expenses 210,000.00…
The condensed product-line income statement for Dish N’ Dat Company for the month of March is as follows: Dish N’ Dat Company Product-Line Income Statement For the Month Ended March 31 1 Bowls Plates Cups 2 Sales $71,450.00 $105,450.00 $31,080.00 3 Cost of goods sold 32,370.00 42,660.00 17,150.00 4 Gross profit $39,080.00 $62,790.00 $13,930.00 5 Selling and administrative expenses 27,590.00 42,730.00 16,200.00 6 Income from operations $11,490.00 $20,060.00 $(2,270.00) Fixed costs are 10% of the cost of goods sold and 30% of the selling and administrative expenses. Dish N’ Dat assumes that fixed costs would not be materially affected if the Cups line were discontinued. Required: a. Prepare a differential analysis dated March 31 to determine if Cups should be continued (Alternative 1) or discontinued (Alternative 2). Refer to the lists of Labels and Amount Descriptions…
Review the contribution margin income statements for Cover-to-Cover Company and Biblio Files Company on their respective Income Statements panels. Complete the following table from the data provided in the income statements. Each company sold 84,800 units during the year. Cover-to-Cover Company Biblio Files Company Contribution margin ratio (percent) Unit contribution margin Break-even sales (units) Break-even sales (dollars) Cover-to-Cover Company Contribution Margin Income Statement For the Year Ended December 31, 20Y7 1 Sales $424,000.00 2 Variable costs: 3 Manufacturing expense $254,400.00 4 Selling expense 21,200.00 5 Administrative expense 63,600.00 339,200.00 6 Contribution margin $84,800.00 7 Fixed costs: 8 Manufacturing expense $5,000.00 9 Selling expense…
During Heaton Company’s first two years of operations, it reported absorption costing net operating income as follows: Year 1 Year 2 Sales (@ $61 per unit) $ 976,000 $ 1,586,000 Cost of goods sold (@ $38 per unit) 608,000 988,000 Gross margin 368,000 598,000 Selling and administrative expenses* 299,000 329,000 Net operating income $ 69,000 $ 269,000 * $3 per unit variable; $251,000 fixed each year. The company’s $38 unit product cost is computed as follows: Direct materials $ 7 Direct labor 12 Variable manufacturing overhead 4 Fixed manufacturing overhead ($315,000 ÷ 21,000 units) 15 Absorption costing unit product cost $ 38 Production and cost data for the first two years of operations are: Year 1 Year 2 Units produced 21,000 21,000 Units sold 16,000 26,000 Required: 1. Using variable costing, what is the unit product cost for both years? 2. What is the variable costing net operating income in Year 1 and in Year 2? 3.…
Kenzi, a manufacturer of kayaks, began operations this year. During this year, the company produced 1,100 kayaks and sold 850 at a price of $1,100 each. At year-end, the company reported the following income statement information using absorption costing. Sales (850 × $1,100) $ 935,000 Cost of goods sold (850 × $425) 361,250 Gross profit 573,750 Selling and administrative expenses 220,000 Income $ 353,750 Additional Information a. Product cost per kayak under absorption costing totals $425, which consists of $325 in direct materials, direct labor, and variable overhead costs and $100 in fixed overhead cost. Fixed overhead of $100 per unit is based on $110,000 of fixed overhead per year divided by 1,100 kayaks produced.b. The $220,000 in selling and administrative expenses consists of $85,000 that is variable and $135,000 that is fixed.Prepare an income statement for the current year under variable costing.
The condensed product-line income statement for Rhinebeck Company for the month of October is as follows: Rhinebeck CompanyProduct-Line Income StatementFor the Month Ended October 31 Hats Gloves Mufflers Sales $64,400 $89,400 $26,000 Cost of goods sold (26,400) (32,000) (15,100) Gross profit $38,000 $57,400 $10,900 Selling and administrative expenses (30,200) (34,200) (15,200) Operating income (loss) $7,800 $23,200 $(4,300) Fixed costs are 15% of the cost of goods sold and 35% of the selling and administrative expenses. Rhinebeck Company assumes that fixed costs would not be materially affected if the Gloves line were discontinued. a. Prepare a differential analysis dated October 31 to determine if Mufflers should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter "0". If required, use a minus sign to indicate a loss.
Kenzi, a manufacturer of kayaks, began operations this year. During this year, the company produced 1,025 kayaks and sold 775 at a price of $1,025 each. At year-end, the company reported the following income statement information using absorption costing. Sales (775 × $1,025) $ 794,375 Cost of goods sold (775 × $500) 387,500 Gross profit 406,875 Selling and administrative expenses 250,000 Income $ 156,875 Additional Information a. Product cost per kayak under absorption costing totals $500, which consists of $400 in direct materials, direct labor, and variable overhead costs and $100 in fixed overhead cost. Fixed overhead of $100 per unit is based on $102,500 of fixed overhead per year divided by 1,025 kayaks produced.b. The $250,000 in selling and administrative expenses consists of $105,000 that is variable and $145,000 that is fixed.Prepare an income statement for the current year under variable costing.
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Jackson Manufacturing, Inc., makes two types of industrial component parts—the XT-100 and the LT-200. An absorption costing income statement for the most recent period is shown: Jackson Manufacturing Inc. Income Statement Sales $2,100,000 Cost of goods sold 1,600,000 Gross margin 500,000 Selling and administrative expenses 550,000 Net operating loss $ (50,000) Table Summary: Income statement with two-line heading. Descriptions of income items are in first column and dollar values in second column. Jackson produced and sold 70,000 units of XT-100 at a price of $20 per unit and 17,500 units of LT-200 at a price of $40 per unit. The company’s traditional cost system allocates manufacturing overhead to products using a plantwide overhead rate and direct labor dollars as the allocation base. Additional information relating to the company’s two product lines is shown below:XT-100 LT-200 Total Direct materials $436,300 $251,700 $ 688,000 Direct labor $200,000 $104,000 304,000 Manufacturing…
The gross margin for Corona Company for the third quarter of the year was R3 250 000, when sales were R7 000 000. The beginning inventory of finished goods was R600 000 and the ending inventory of finished goods was R850 000. The cost of goods manufactured for the third quarter would have been:A.R3 850 000B.R3 750 000C.R4 000 000D.R3 500 000