Trez Company began operations this year. During this year, the company produced 100,000 units and sold 80,000 units. Theabsorption costing income statement for this year follows.Income Statement (Absorption Costing)Sales (80,000 units x $45 per unit)Cost of goods soldGross profitSelling and administrative expensesIncomeAdditional Information$ 3,600,0002,000,0001,600,000490,000$ 1,110,000a. Selling and administrative expenses consist of $350,000 in annual fixed expenses and $1.75 per unit in variable selling andadministrative expenses.b. The company's product cost of $25 per unit consists of the following.Direct materialsDirect laborVariable overheadFixed overhead ($700,000 / 100,000 units)Required:$ 5 per unit$ 10 per unit$ 3 per unit$ 7 per unitPrepare an income statement for the company under variable costing.TREZ Company

Step 1:Computation of the unit product cost under variable costing:Direct materials cost per…

Answered: Trez Company began operations this…

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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Dowell Company produces a single product. Its income statements under absorption costing for its first two years of operation follow. Income Statements (Absorption Costing) Year 1 Year 2 Sales ($50 per unit) $ 1,350,000 $ 2,550,000 Cost of goods sold ($39 per unit) 1,053,000 1,989,000 Gross profit 297,000 561,000 Selling and administrative expenses 247,000 271,000 Income $ 50,000 $ 290,000 Additional Information Sales and production data for these first two years follow. Units Year 1 Year 2 Units produced 39,000 39,000 Units sold 27,000 51,000 Variable costs per unit and fixed costs per year are unchanged during these years. The company's $39 per unit product cost using absorption costing consists of the following. Direct materials $ 16 Direct labor 9 Variable overhead 5 Fixed overhead ($351,000/39,000 units) 9 Total product cost per unit $ 39 Selling and administrative expenses consist of the following. Selling and…
A condensed income statement by product line for Master Energy Co. indicated the following for the Master Energy product line for the past year: Revenues and Costs Dollar Amount Sales $12,300,000 Cost of goods sold 8,250,000 Gross profit 4,250,000 Operating expenses 6,010,000 Loss from operations (1,960,000) It is estimated that 25% of the cost of goods sold represents fixed factory overhead costs and that 15% of the operating expenses are fixed. Because Master Energy is only one of many products, the fixed costs will not be materially affected if the product is discontinued. Prepare a differential analysis dated March 31st to determine whether Master Energy should be continued (Alternative 1) or discontinued (Alternative 2). Should Master Energy be retained? Explain.
Kenzi, a manufacturer of kayaks, began operations this year. During this year, the company produced 1,050 kayaks and sold 800 at a price of $1,050 each. At year-end, the company reported the following income statement information using absorption costing. Sales (800 × $1,050) $ 840,000 Cost of goods sold (800 × $450) 360,000 Gross profit 480,000 Selling and administrative expenses 220,000 Income $ 260,000 Additional Information a. Product cost per kayak under absorption costing totals $450, which consists of $350 in direct materials, direct labor, and variable overhead costs and $100 in fixed overhead cost. Fixed overhead of $100 per unit is based on $105,000 of fixed overhead per year divided by 1,050 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.
Data concerning Dakota Enterprises' operations last year appear below: Units in the Beginning Inventory -0- Units Units Produced 4,000 Units Units Sold 3,900 Units Selling Price Per Unit $140 Variable Costs Per Unit: Direct Material $41 Direct Labor 43 Manufacturing Overhead 6 Sellling and Administrative Costs 4 Fixed Costs in Total: Manufacturing Overhead $84,000 Selling and Administrative Costs 39,000 Match each of the following items with the proper amount. Unit Product Cost , Using Absorption Costing Unit Gross Margin…
During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Year 1 Sales (862 per unit) Year 2 $930,000 $1,550,000 495,000 Cost of goods sold t# $33 per unit) Gross margin 625,000 435,000 725,000 Selling and adninistrative expenses 292.000 322,000 Set operating income $ 143,000 $ 403,000 *$3 per unit variable: $247,000 fixed each year. The company's $33 unit product cost is computed as follows: Dirpet materials Diret labor Variable manufacturing overhead 3 13 Fixed manufacturing overhead (5260,000 20,000 unita) Absorption costing unit product cost Production and cost data for the first two years of operations are Year 1 Year 2 Units produced 20,000 20,000 thits sold 15,000 25,000 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 27 3. Reconcile the absorption costing and the variable costing net operating income figures…
Whitman Company has just completed its first year of operations. The company's traditional format income statement for the year follows: Whitman Company Income Statement Sales (35,000 units × $25 per unit) Cost of goods sold (35,000 units × $15 per unit) Gross margin Selling and administrative expenses Net operating income Amount $ 875,000 525,000 350,000 278,000 $ 72,000 The company's selling and administrative expenses consist of $208,000 per year in fixed expenses and $2 per unit sold in variable expenses. The $15 unit product cost given above is computed as follows: Direct materials Direct labor Variable overhead Fixed overhead ($100,000 ÷ 50,000 units) Unit product cost (under traditional costing) $ 6 6 1 2 $15 Required: 1. Prepare a contribution format income statement for the year ended December 31. 2. What was the contribution toward fixed expenses and profits for each unit sold? (State this figure in a single dollar amount per snowboard.) 3. What would operating income be if…
ed Dowell Company produces a single product. Its income statements under absorption costing for its first two years of operation follow. Income Statements (Absorption Costing) Sales ($60 per unit) Year 1 $ Year 2 $ 1,920,000 3,960,000 Cost of goods sold ($45 per unit) 1,440,000 2,970,000 Gross profit 480,000 990,000 Selling and administrative expenses ok Income t 338,000 474,000 $ 142,000 $ 516,000 Additional Information a. Sales and production data for these first two years follow. Year 1 Year 2 nces Units Units produced 49,000 49,000 Units sold 32,000 66,000 b. Variable costs per unit and fixed costs per year are unchanged during these years. The company's $45 per unit product cost using absorption costing consists of the following. Direct materials Direct labor $ 12 19 Variable overhead Fixed overhead ($539,000/49,000 units) 3 11 Total product cost per unit $ 45 c. Selling and administrative expenses consist of the following. Selling and Administrative Expenses Variable selling and…
Darby Company, operating at full capacity, sold 129,600 units at a price of $123 per unit during the current year. Its income statement is as follows: Sales $15,940,800 Cost of goods sold 5,658,000 Gross profit $10,282,800 Expenses: Selling expenses $2,829,000 Administrative expenses 1,681,000 Total expenses 4,510,000 Income from operations $5,772,800 The division of costs between variable and fixed is as follows: Variable Fixed Cost of goods sold 60% 40% Selling expenses 50% 50% Administrative expenses 30% 70% Management is considering a plant expansion program for the following year that will permit an increase of $1,476,000 in yearly sales. The expansion will increase fixed costs by $196,800, but will not affect the relationship between sales and variable costs. Required: 1. Determine the total variable costs and the total fixed costs for the current year. Total variable costs $fill in the blank 1…
Darby Company, operating at full capacity, sold 124,200 units at a price of $84 per unit during the current year. Its income statement is as follows: Sales $10,432,800 Cost of goods sold 3,696,000 Gross profit $6,736,800 Expenses: Selling expenses $1,848,000 Administrative expenses 1,120,000 Total expenses 2,968,000 Income from operations $3,768,800 The division of costs between variable and fixed is as follows: Variable Fixed Cost of goods sold 60% 40% Selling expenses 50% 50% Administrative expenses 30% 70% Management is considering a plant expansion program for the following year that will permit an increase of $924,000 in yearly sales. The expansion will increase fixed costs by $123,200, but will not affect the relationship between sales and variable costs. 1. Determine the total variable costs and the total fixed costs for the current year. Total variable costs $fill in the blank 1 Total fixed…
During Heaton Company’s first two years of operations, it reported absorption costing net operating income as follows: Year 1 Year 2 Sales (@ $62 per unit) $ 1,178,000 $ 1,798,000 Cost of goods sold (@ $42 per unit) 798,000 1,218,000 Gross margin 380,000 580,000 Selling and administrative expenses* 306,000 336,000 Net operating income $ 74,000 $ 244,000 * $3 per unit variable; $249,000 fixed each year. The company’s $42 unit product cost is computed as follows: Direct materials $ 8 Direct labor 11 Variable manufacturing overhead 5 Fixed manufacturing overhead ($432,000 -: 24,000 units) 18 Absorption costing unit product cost $ 42 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: Using variable costing, what is the unit product cost for both years? What is the variable costing net operating income in Year 1 and in Year 2? Reconcile the absorption costing and the variable costing net operating…
Whitman Company has just completed its first year of operations. The company's absorption costing income statement for the year follows: Whitman Company Income Statement Sales (40,000 units x $44.60 per unit) Cost of goods sold (40,000 units x $22 per unit) Gross margin Selling and administrative expenses Net operating income $ 1,784,000 880,000 904,000 460,000 $ 444,000 The company's selling and administrative expenses consist of $300,000 per year in fixed expenses and $4 per unit sold in variable expenses. The $22 unit product cost given above is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($180,000 + 45,000 units) Absorption costing unit product cost Required: $ 10 5 3 4 $ 22 1. Redo the company's income statement in the contribution format using variable costing. 2. Reconcile any difference between the net operating income on your variable costing income statement and the net operating income on the absorption…
Whitman Company has just completed its first year of operations. The company's absorption costing income statement for the year follows: Whitman Company Income Statement Sales (42,000 units x $43.60 per unit) Cost of goods sold (42,000 units x $23 per unit) Gross margin Selling and administrative expenses Net operating income $ 1,831, 200 966,000 865,200 483,000 $ 382,200 The company's selling and administrative expenses consist of $315,000 per year in fixed expenses and $4 per unit sold in variable expenses. The $23 unit product cost given above is computed as follows: Direct materials. Direct labor $ 10 4 Variable manufacturing overhead 3 Fixed manufacturing overhead ($276,000 46,000 units) 6 Absorption costing unit product cost $ 23 Required: 1. Redo the company's income statement in the contribution format using variable costing. 2. Reconcile any difference between the net operating income on your variable costing income statement and the net operating income on the absorption…

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