Variable Cost and Full Costing Income: Comprehensive problem; Break-even Calculation. the following information relates to Axar Products for calendar year 2020, the company's first year of operation. Units produced 20,000 Units sold 18,000 Selling price per unit $30 Direct material per unit $6 Direct labor per unit $4 Variable manufacturing overhead per unit $2 Variable selling cost per unit $3 Annual fixed manufacturing overhead $160,000 Annual fixed selling and administration expense $80,000 Required: a. Prepare an income statement using full costing b. Prepare an incomve statement using variable costing c. Using the variable costing income statement, calculate the company's break-even point in sales dollars and in units. Can the break-even point be calculated easily using the full costing income statement? Why or why not?

Variable Cost and Full Costing Income: Comprehensive problem; Break-even Calculation. the following information relates to Axar Products for calendar year 2020, the company's first year of operation. Units produced 20,000 Units sold 18,000 Selling price per unit $30 Direct material per unit $6 Direct labor per unit $4 Variable manufacturing overhead per unit $2 Variable selling cost per unit $3 Annual fixed manufacturing overhead $160,000 Annual fixed selling and administration expense $80,000 Required: a. Prepare an income statement using full costing b. Prepare an incomve statement using variable costing c. Using the variable costing income statement, calculate the company's break-even point in sales dollars and in units. Can the break-even point be calculated easily using the full costing income statement? Why or why not?

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter7: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 26BEB: Variable Cost Ratio, Contribution Margin Ratio Chillmax Company plans to sell 3,500 pairs of shoes...

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Cost Classification Loring Company incurred the following costs last year: Required: 1. Classify each of the costs using the following table format. Be sure to total the amounts in each column. Example: Direct materials, 216,000. 2. What was the total product cost for last year? 3. What was the total period cost for last year? 4. If 30,000 units were produced last year, what was the unit product cost?
Identify cost graphs The following cost graphs illustrate various types of cost behavior: For each of the following costs, identify the cost graph that best illustrates its cost behavior as the number of units produced increases: A. Total direct materials cost B. Electricity costs of 1,000 per month plus 0.10 per kilowatt-hour C. Per-unit cost of straight-line depreciation on factory equipment D. Salary of quality control supervisor, 20,000 per month E. Per-unit direct labor cost
Olivian Company wants to earn 420,000 in net (after-tax) income next year. Its product is priced at 275 per unit. Product costs include: Variable selling expense is 14 per unit; fixed selling and administrative expense totals 290,000. Olivian has a tax rate of 40 percent. Required: 1. Calculate the before-tax profit needed to achieve an after-tax target of 420,000. 2. Calculate the number of units that will yield operating income calculated in Requirement 1 above. (Round to the nearest unit.) 3. Prepare an income statement for Olivian Company for the coming year based on the number of units computed in Requirement 2. 4. What if Olivian had a 35 percent tax rate? Would the units sold to reach a 420,000 target net income be higher or lower than the units calculated in Requirement 3? Calculate the number of units needed at the new tax rate. (Round dollar amounts to the nearest dollar and unit amounts to the nearest unit.)
A company estimates its manufacturing overhead will be $750,000 for the next year. What is the predetermined overhead rate given the following independent allocation bases? Budgeted direct labor hours: 60,000 Budgeted direct labor expense: $1,500,000 Estimated machine hours: 100,000
Wellington, Inc., reports the following contribution margin income statement for the month of May. The company has the opportunity to purchase new machinery that will reduce its variable cost per unit by $10 but will increase fixed costs by 20%. Prepare a projected contribution margin income statement for Wellington, Inc., assuming it purchases the new equipment. Assume sales level remains unchanged.
Markham Farms reports the following contribution margin income statement for the month of August. The company has the opportunity to purchase new machinery that will reduce its variable cost per unit by $2 but will increase fixed costs by 15%. Prepare a projected contribution margin income statement for Markham Farm assuming it purchases the new equipment. Assume sales level remains unchanged.
Variable Cost Ratio, Contribution Margin Ratio Chillmax Company plans to sell 3,500 pairs of shoes at 60 each in the coming year. Unit variable cost is 21 (includes direct materials, direct labor, variable factory overhead, and variable selling expense). Fixed factory overhead is 30,000 and fixed selling and administrative expense is 48,000. Required: 1. Calculate the variable cost ratio. 2. Calculate the contribution margin ratio. 3. Prepare a contribution margin income statement based on the budgeted figures for next year. In a column next to the income statement, show the percentages based on sales for sales, total variable cost, and total contribution margin.
Estimated income statements, using absorption and variable costing Prior to the first month of operations ending October 31, Marshall Inc. estimated the following operating results: The company is evaluating a proposal to manufacture 50,000 units instead of 40,000 units, thus creating an ending inventory of 10,000 units. Manufacturing the additional units will not change sales, unit variable factory overhead costs, total fixed factory overhead cost, or total selling and administrative expenses. a. Prepare an estimated income statement, comparing operating results if 40,000 and 50,000 units are manufactured in (1) the absorption costing format and (2) the variable costing format. b. What is the reason for the difference in operating income reported for the two levels of production by the absorption costing income statement?
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Sales Needed to Earn Target Income Chillmax Company plans to sell 3,500 pairs of shoes at 60 each in the coming year. Variable cost is 35% of the sales price; contribution margin is 65% of the sales price. Total fixed cost equals 78,000 (includes fixed factory overhead and fixed selling and administrative expense). Required: 1. Calculate the sales revenue that Chillmax must make to earn operating income of 81,900 by using the point in sales equation. 2. Check your answer by preparing a contribution margin income statement based on the sales dollars calculated in Requirement 1.
Variable Cost and Full Costing Income: Comprehensive problem; Break-even Calculation. the following information relates to Axar Products for calendar year 2020, the company's first year of operation. Units produced 20,000 Units sold 18,000 Selling price per unit $30 Direct material per unit $6 Direct labor per unit $4 Variable manufacturing overhead per unit $2 Variable selling cost per unit $3 Annual fixed manufacturing overhead $160,000 Annual fixed selling and administration expense $80,000 Required: a. Prepare an income statement using full costing b. Prepare an incomve statement using variable costing c. Using the variable costing income statement, calculate the company's break-even point in sales dollars and in units. Can the break-even point be calculated easily using the full costing income statement? Why or why not?
What is the net income for January 2020 under absorption costing? The selling price is P20.00 per unit