Variable and Absorption Costing Summarized data for 2016 (the first year of operations) for Gorman Products, Inc., are as follows: Sales (75,000 units). Production costs (80,000 units): Direct material... Direct labor. $3,000,000 ... 880,000 720,000 Manufacturing overhead: Variable. Fixed.. Operating expenses: Variable.. Fixed.... 544,000 320,000 168,000 240,000 60,000 18,000 28,800 30,000 Depreciation on equipment Real estate taxes Personal property taxes (on inventory and equipment) Personnel department expenses Required Prepare an income statement based on full absorption costing. b. Prepare an income statement based on variable costing. Assume that you must decide quickly whether to accept a special one-time order for 1,000 units for $30 per unit. Which income statement presents the most relevant data? Determine the appar- ent profit or loss on the special order based solely on these data. d. a, с. If the ending inventory is destroyed by fire, which costing approach would you use as a basis for filing an insurance claim for the fire loss? Why?
Variable and Absorption Costing Summarized data for 2016 (the first year of operations) for Gorman Products, Inc., are as follows: Sales (75,000 units). Production costs (80,000 units): Direct material... Direct labor. $3,000,000 ... 880,000 720,000 Manufacturing overhead: Variable. Fixed.. Operating expenses: Variable.. Fixed.... 544,000 320,000 168,000 240,000 60,000 18,000 28,800 30,000 Depreciation on equipment Real estate taxes Personal property taxes (on inventory and equipment) Personnel department expenses Required Prepare an income statement based on full absorption costing. b. Prepare an income statement based on variable costing. Assume that you must decide quickly whether to accept a special one-time order for 1,000 units for $30 per unit. Which income statement presents the most relevant data? Determine the appar- ent profit or loss on the special order based solely on these data. d. a, с. If the ending inventory is destroyed by fire, which costing approach would you use as a basis for filing an insurance claim for the fire loss? Why?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Please help me figure a-d
Transcribed Image Text:Variable and Absorption Costing Summarized data for 2016 (the first year of operations) fo.
Gorman Products, Inc., are as follows:
Sales (75,000 units)...
Production costs (80,000 units):
Direct material.... .. .
$3,000,000
880,000
720,000
Direct labor.
Manufacturing overhead:
Variable..
544,000
320,000
Fixed.
Operating expenses:
Variable..
168,000
240,000
60,000
18,000
28,800
30,000
Fixed.
Depreciation on equipment
Real estate taxes
Personal property taxes (on inventory and equipment).
Personnel department expenses.
Required
Prepare an income statement based on full absorption costing.
b. Prepare an income statement based on variable costing.
Assume that you must decide quickly whether to accept a special one-time order for 1,000 units
for $30 per unit. Which income statement presents the most relevant data? Determine the appar-
ent profit or loss on the special order based solely on these data.
d.
a,
C.
If the ending inventory is destroyed by fire, which costing approach would you use as a basis for
filing an insurance claim for the fire loss? Why?
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