Financial And Managerial Accounting
15th Edition
ISBN: 9781337902663
Author: WARREN, Carl S.
Publisher: Cengage Learning,
expand_more
expand_more
format_list_bulleted
Question
Chapter 21, Problem 2PA
1.
To determine
Prepare an estimated income statement according to the absorption costing concept for the Incorporation LI for the month of October.
2.
To determine
Prepare an estimated income statement according to the variable costing concept for the Incorporation LI for the month of October.
3.
To determine
Identify the amount of temporary loss would be incurred by Incorporation LI, if the production were temporarily suspended for October.
4.
To determine
Advice for the management.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
The demand for solvent, one of numerous products manufactured by Logan Industries Inc., has dropped sharply because of recent competition from a similar product. The company’s chemists are currently completing tests of various new formulas, and it is anticipated that the manufacture of a superior product can be started on November 1, one month in the future. No changes will be needed in the present production facilities to manufacture the new product because only the mixture of the various materials will be changed.
The controller has been asked by the president of the company for advice on whether to continue production during October or to suspend the manufacture of solvent until November 1. The following data have been assembled:
Logan Industries Inc.
Income Statement—Solvent
For the Month Ended September 30
1
Sales (10,000 units)
$800,000.00
2
Cost of goods sold
(770,000.00)
3
Gross profit
$30,000.00
4
Selling and…
The demand for solvent, one of numerous products manufactured by Logan Industries Inc., has dropped sharply because of recent competition from a similar product. The company’s chemists are currently completing tests of various new formulas, and it is anticipated that the manufacture of a superior product can be started on November 1, one month in the future. No changes will be needed in the present production facilities to manufacture the new product because only the mixture of the various materials will be changed.
The controller has been asked by the president of the company for advice on whether to continue production during October or to suspend the manufacture of solvent until November 1. The following data have been assembled:
Logan Industries Inc.
Income Statement—Solvent
For the Month Ended September 30
1
Sales (10,000 units)
$800,000.00
2
Cost of goods sold
(770,000.00)
3
Gross profit
$30,000.00
4
Selling and administrative…
The demand for solvent, one of numerous products manufactured by RZM Industries Inc., has dropped sharply because of recent competition from a similar product. The company’s chemists are currently completing tests of various new formulas, and it is anticipated that the manufacture of a superior product can be started on June 1, one month in the future. No changes will be needed in the present production facilities to manufacture the new product because only the mixture of the various materials will be changed. The controller has been asked by the president of the company for advice on whether to continue production during May or to suspend the manufacture of solvent until June 1. The controller has assembled the following pertinent data:
RZM Industries Inc.
Income Statement—Solvent
For the Month Ended April 30
1
Sales (4,000 units)
$500,000.00
2
Cost of goods sold
424,000.00
3
Gross profit
$76,000.00
4
Selling and administrative…
Chapter 21 Solutions
Financial And Managerial Accounting
Ch. 21 - What types of costs are customarily included in...Ch. 21 - Which type of manufacturing cost (direct...Ch. 21 - Which of the following costs would be included in...Ch. 21 - In the variable costing income statement, how are...Ch. 21 - The manager of a company are planning to...Ch. 21 - Since all costs of operating a business are...Ch. 21 - Discuss how financial data prepared on the basis...Ch. 21 - Why might management analyze product...Ch. 21 - Explain why rewarding sales personnel on the basis...Ch. 21 - Explain why service companies use different...
Ch. 21 - Variable costing Marley Company has the following...Ch. 21 - Variable costingproduction exceeds sales Fixed...Ch. 21 - Variable costingsales exceed production The...Ch. 21 - Analyzing income under absorption and variable...Ch. 21 - Contribution margin by segment The following...Ch. 21 - At the end of the first year of operations, 21,500...Ch. 21 - Gallatin County Motors Inc. assembles and sells...Ch. 21 - Fresno Industries Inc. manufactures and sells...Ch. 21 - On March 31, the end of the first month of...Ch. 21 - On April 30, the end of the first month of...Ch. 21 - On October 31, the end of the first month of...Ch. 21 - The following data were adapted from a recent...Ch. 21 - Estimated income statements, using absorption and...Ch. 21 - The following data were adapted from a recent...Ch. 21 - How is the quantity factor for an increase or a...Ch. 21 - Explain why service companies use different...Ch. 21 - Galaxy Sports Inc. manufactures and sells two...Ch. 21 - Prob. 13ECh. 21 - Sales territory and salesperson profitability...Ch. 21 - Prob. 15ECh. 21 - Prob. 16ECh. 21 - Variable costing income statement for a service...Ch. 21 - Variable costing income statement for a service...Ch. 21 - Absorption and variable costing income statements...Ch. 21 - Prob. 2PACh. 21 - During the first month of operations ended May 31,...Ch. 21 - Salespersons report and analysis Walthman...Ch. 21 - Segment variable costing income statement and...Ch. 21 - Absorption and variable costing income statements...Ch. 21 - Income statements under absorption costing and...Ch. 21 - Absorption and variable costing income statements...Ch. 21 - Salespersons report and analysis Pachec Inc....Ch. 21 - Prob. 5PBCh. 21 - Comcast Corporation (CMCSA) is a global media and...Ch. 21 - Prob. 2MADCh. 21 - Prob. 3MADCh. 21 - Segment disclosure by Apple Inc. (AAPL) provides...Ch. 21 - Prob. 1TIFCh. 21 - Inventory effects under absorption costing BendOR,...Ch. 21 - Communication Bon Jager Inc. manufactures and...Ch. 21 - Data for the last fiscal year for Merlene Company...Ch. 21 - Chassen Company, a cracker and cookie...Ch. 21 - Mill Corporation had the following unit costs for...Ch. 21 - Bethany Company has just completed the first month...
Knowledge Booster
Similar questions
- The demand for solvent, one of numerous products manufactured by Celecia Industries Inc., has dropped sharply because of recent competition from a similar product. The company’s chemists are currently completing tests of various new formulas, and it is anticipated that the manufacture of a superior product can be started on July 1, one month in the future. No changes will be needed in the present production facilities to manufacture the new product because only the mixture of the various materials will be changed. The controller has been asked by the president of the company for advice on whether to continue production during June or to suspend the manufacture of solvent until July 1. The following data have been assembled: Celecia Industries Inc. Income Statement—Solvent For the Month Ended May 31 1 Sales (25,000 units x $15 per unit) $375,000.00 2 Cost of goods sold (256,250.00) 3 Gross profit $118,750.00 4 Selling and…arrow_forwardThe demand for solvent, one of numerous products manufactured byLogan Industries Inc., has dropped sharply because of recentcompetition from a similar product. The company's chemists arecurrently completing tests of various new formulas, and it is anticipatedthat the manufacture of a superior product can be started on November 1, one month in the future. No changes will be needed in the presentproduction facilities to manufacture the new product because only themixture of the various materials will be changed. The controller has been asked by the president of the company foradvice on whether to continue production during October or to suspendthe manufacture of solvent until November 1. The following data havebeen assembled: Logan Industries Inc.Income Statement-SolventFor the Month Ended September 30 Sales (10,000 units) .... ........Cost of goods soldGross profit . . .... ..Selling and administrative expenses...Operating loss . .. . . .. $ 800,000(770,000)$…arrow_forwardThe demand for solvent, one of numerous products manufactured by Logan IndustriesInc., has dropped sharply because of recent competition from a similar product. Thecompany’s chemists are currently completing tests of various new formulas, and it isanticipated that the manufacture of a superior product can be started on November 1, onemonth in the future. No changes will be needed in the present production facilities tomanufacture the new product because only the mixture of the various materials will bechanged.The controller has been asked by the president of the company for advice on whether tocontinue production during October or to suspend the manufacture of solvent untilNovember 1. The following data have been assembled: REFER IMAGE The production costs and selling and administrative expenses, based on production of10,000 units in September, are as follows: Direct Materials $35 per unit Direct labor 24 per unit Variable manufacturing cost 8 per unit Variable selling and…arrow_forward
- The demand for aloe vera hand lotion, one of numerous products manufactured by Smooth Skin Care Products Inc., has dropped sharply because of recent competition from a similar product. The company's chemists are currently completing tests of various new formulas, and it is anticipated that the manufacture of a superior product can be started on December 1, one month in the future. No changes will be needed in the present production facilities to manufacture the new product because only the mixture of the various materials will be changed. The controller has been asked by the president of the company for advice on whether to continue production during November or to suspend the manufacture of aloe vera hand lotion until December 1. The controller has assembled the following pertinent data: Smooth Skin Care Products Inc.Income Statement—Aloe Vera Hand LotionFor the Month Ended October 31 Sales (400,000 units) $32,000,000 Cost of goods sold 28,330,000 Gross profit $3,670,000…arrow_forwardThe demand for aloe vera hand lotion, one of numerous products manufactured by Smooth Skin Care Products Inc., has dropped sharply because of recent competition from a similar product. The company’s chemists are currently completing tests of various new formulas, and it is anticipated that the manufacture of a superior product can be started on December 1, one month in the future. No changes will be needed in the present production facilities to manufacture the new product because only the mixture of the various materials will be changed. The controller has been asked by the president of the company for advice on whether to continue production during November or to suspend the manufacture of aloe vera hand lotion until December 1. The controller has assembled the following pertinent data:Smooth Skin Care Products Inc.Income Statement - Aloe Vera Hand LotionFor the Month Ended January 31Financial Categories Dollar AmountSales (400,000)…arrow_forwardJohnson Limited is contemplating the installation of a new system that would allow for automated handling of customer inquiries about their order status, account balances, etc. Currently all such inquiries are handled manually by customer service representatives. The software for the new system would cost $214,000. An additional $169,000 would be required for one-time installation costs. Management estimates that the new system would result in costs of $10,300 per year related to addressing software issues and other technological problems that may arise. However, the new system is expected to reduce labour costs by $65,000 per year. Management estimates that the system would be used for five years. Severance costs related to the employees that would be laid off after implementing the new system would be $22,600. Johnson Limited requires a return of at least 15% on investments of this type. Required: Ignore income taxes. 1. Compute the net annual cost savings promised by the new system.…arrow_forward
- In the last 6 months, demand for one of Appleby Company's products has dropped off considerably, due mainly to it becoming obsolescent as a result of technological change. Knowing that the equipment used in the manufacture of this product may not be easy to sell, Appleby spent $50,000 on consultants to determine whether it could use the equipment to produce a new product under license by another company. The consultant has determined that this product would have variable production costs of $65 per unit and should sell at a price of $90/unit. The licensing royalty is 5% of gross product revenue. Estimated annual demand is 20,000 units per year. Additional annual operating costs related to this product are $30,000/year (excluding depreciation). Depreciation on the equipment is $15,000. Annual depreciation expense is a: O a. Sunk cost O b. Relevant cost O c. Both sunk and Irrelevant cost Od. Irrelevant costarrow_forwardNico Parts, Inc., produces electronic products with short life cycles (of less than two years). Development has to be rapid, and the profitability of the products is tied strongly to the ability to find designs that will keep production and logistics costs low. Recently, management has also decided that post-purchase costs are important in design decisions. Last month, a proposal for a new product was presented to management. The total market was projected at 220,000 units (for the two-year period). The proposed selling price was $145 per unit. At this price, market share was expected to be 25 percent. The manufacturing and logistics costs were estimated to be $136 per unit. Upon reviewing the projected figures, Brian Metcalf, president of Nico, called in his chief design engineer, Mark Williams, and his marketing manager, Cathy McCourt. The following conversation was recorded: BRIAN: Mark, as you know, we agreed that a profit of $13 per unit is needed for this new product. Also, as I…arrow_forwardNico Parts, Inc., produces electronic products with short life cycles (of less than two years). Development has to be rapid, and the profitability of the products is tied strongly to the ability to find designs that will keep production and logistics costs low. Recently, management has also decided that post-purchase costs are important in design decisions. Last month, a proposal for a new product was presented to management. The total market was projected at 220,000 units (for the two-year period). The proposed selling price was $128 per unit. At this price, market share was expected to be 25 percent. The manufacturing and logistics costs were estimated to be $119 per unit. Upon reviewing the projected figures, Brian Metcalf, president of Nico, called in his chief design engineer, Mark Williams, and his marketing manager, Cathy McCourt. The following conversation was recorded: BRIAN: Mark, as you know, we agreed that a profit of $14 per unit is needed for this new product. Also, as I…arrow_forward
- The Electric Division of Ecological Products Co. has developed a wind generator that requires a special "S" ball bearing. The Ball Bearing Division of Ecological Products Co. has the capability to produce such a ball bearing. Unfortunately, the Ball Bearing Division is operating at capacity and will need to reduce production of another existing product, the "T" bearing, by 1,000 units per month to provide the 600 "S" bearings needed each month by the Electric Division. The "T" bearing currently sells for $50 per unit. Variable costs incurred to produce the "T" bearing are $30 per unit; variable costs to produce the new "S" bearing would be $60 per unit. The Electric Division has found an external supplier that would furnish the needed "S" bearings at $100 per unit. Assume that both the Electric Division and Ball Bearing Division are independent, autonomous investment centers. 1. Refer to Ecological Products Co. What is the maximum price per unit that Electric Division would be willing…arrow_forwardDupont Corp. recently discontinued operations on one of its four branches, the branch is nowconducting a clearance sale. The fixed assets in the discontinued branch are now being offered forsale and a buyer has been identified. The sale can take place within a year.Despite all this, the management is insisting on presenting all the fixed assets, including those thatbelong to the disposal group as PPE as it would give an impression of large manufacturingcapacity. They are not in favour of presenting any amount of revenues from discontinuedoperations as well. Explain to them why these assets are no longer PPE and should be separated as assets-held-for-sale and why income on discontinued operation should be separated from continuing operation.arrow_forwardAn oil refinery finds that it is necessary to treat the waste liquids from a new process before discharging them into a stream. In-house treatment will have an annual cost of $20,000 the first year, but process improvements will allow the annual cost to decline by $2,000 each subsequent year. As an alternative, an outside company will process the wastes for an initial cost of $10,500 and an annual fixed price of $8,500/year throughout the 11 year period. Either way, there is no need to treat the wastes after 11 years. Using the AW method, calculate the equivalent uniform annual cost (EUAC) of each alternative and determine how the waste should be processed. The company's MARR is 12%. Click the icon to view the interest and annuity table for discrete compounding when the MARR is 12% per year. The EUAC for in-house treatment is $ positive cash flow.) The EUAC for outside treatment is S positive cash flow.) The most economical alternative is O A. outside treatment B. in-house treatment…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College PubPrinciples of Cost AccountingAccountingISBN:9781305087408Author:Edward J. Vanderbeck, Maria R. MitchellPublisher:Cengage LearningCornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
Principles of Cost Accounting
Accounting
ISBN:9781305087408
Author:Edward J. Vanderbeck, Maria R. Mitchell
Publisher:Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning