MANAGERIAL ACCOUNTING W/ACCESS
5th Edition
ISBN: 9781266245619
Author: Noreen
Publisher: MCG
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Question
Chapter 4, Problem 1AE
1.
To determine
Introduction: Absorption costing is a technique for calculating cost of product by taking indirect expense and direct cost into consideration.
To check: Worksheet and complete the calculation
1.
Expert Solution
Answer to Problem 1AE
Complete worksheet is given below
Explanation of Solution
| Data | Amount $ | `Amount $ |
| Selling price per unit | 50 | |
| Variable per unit product | ||
| Direct material | 11 | |
| Direct labor | 6 | |
| Variable manufacturing | 3 | |
| Fixed manufacturing overhead per year | 120000 | |
| Selling and administrative expenses | ||
| Variable per unit sold | 4 | |
| Fixed per year | 70000 | |
| Year 1 | Year 2 | |
| Units in beginning inventory | 0 | |
| Units produced during the year | 10000 | 6000 |
| Units sold during the year | 8000 | 8000 |
| Contrasting variable and absorption costing | ||
| Ending inventory | ||
| Units beginning inventory | 0 | 2000 |
| Units product during the year | 10000 | 6000 |
| Unit sold during the year | 8000 | 8000 |
| Units in ending inventory | 2000 | 0 |
| The absorption costing units product cost | ||
| Direct material | 11 | 11 |
| Direct labor | 6 | 6 |
| Variable manufacturing overhead | 3 | 3 |
| Fixed manufacturing overhead | 12 | 20 |
| Absorption costing per unit product cost | 32 | 40 |
| The absorption costing income statement | ||
| Sales | 400000 | 400000 |
| Cost of goods | 256000 | 304000 |
| Gross margin | 144000 | 96000 |
| Selling and administrative expense | 102000 | 102000 |
| Net operating income | 42000 | (6000) |
| The variable costing unit products cost | ||
| Direct materials | 11 | 11 |
| Direct labor | 6 | 6 |
| Variable manufacturing overhead | 3 | 3 |
| Variable costing units production cost | 20 | 20 |
| Data | Year 1 | Year 2 | ||
| Amount $ | Amount $ | Amount $ | Amount $ | |
| Variable costing income statement. | 400000 | 400000 | ||
| Sales | ||||
| Variable expense | ||||
| Variable cost of goods sold | 160000 | 160000 | ||
| Variable selling and administrative expense | 32000 | 192000 | 32000 | 192000 |
| Contribution margin | 208000 | 208000 | ||
| Fixed expense | ||||
| Fixed manufacturing overhead | 120000 | 120000 | ||
| Fixed selling and administrative expense | 70000 | 190000 | 70000 | 190000 |
| Net operating income | 18000 | 18000 | ||
Net operating income of the company:
| Data | Amount $ | `Amount $ |
| Selling price per unit | 50 | |
| Manufacturing cost | ||
| Variable per unit product | ||
| Direct material | 11 | |
| Direct labor | 6 | |
| Variable manufacturing overhead | 3 | |
| Fixed manufacturing overhead per year | 120,000 | |
| Selling and administrative expenses | ||
| Variable per unit sold | 4 | |
| Fixed per year | 70,000 | |
| Year 1 | Year 2 | |
| Units in beginning inventory | 0 | |
| Units produced during the year | 10000 | 6,000 |
| Units sold during the year | 8000 | 6,000 |
| Contrasting variable and absorption costing | ||
| Ending inventory | ||
| Units beginning inventory | 0 | 2,000 |
| Units product during the year | 10,000 | 6,000 |
| Unit sold during the year | 8,000 | 6,000 |
| Units in ending inventory | 2,000 | 2,000 |
| The absorption costing units product cost | ||
| Direct material | 11 | 11 |
| Direct labor | 6 | 6 |
| Variable manufacturing overhead | 3 | 3 |
| Fixed manufacturing overhead | 12 | 20 |
| Absorption costing per unit product cost | 32 | 40 |
| The absorption costing income statement | ||
| Sales | 400,000 | 300,000 |
| Cost of goods | 256,000 | 240,000 |
| Gross margin | 144,000 | 60,000 |
| Selling and administrative expense | 102,000 | 94,000 |
| Net operating income | 42,000 | (34,000) |
| The variable costing unit products cost | ||
| Direct materials | 11 | 11 |
| Direct labor | 6 | 6 |
| Variable manufacturing overhead | 3 | 3 |
| Variable costing units production cost | 20 | 20 |
| Data | Year 1 | Year 2 | ||
| Amount $ | Amount $ | Amount $ | Amount $ | |
| Variable costing income statement. | 400,000 | 300,000 | ||
| Sales | ||||
| Variable expense | ||||
| Variable cost of goods sold | 160,000 | 120000 | ||
| Variable selling and administrative expense | 32,000 | 192,000 | 24,000 | 144,000 |
| Contribution margin | 208,000 | 156,000 | ||
| Fixed expense | ||||
| Fixed manufacturing overhead | 120,000 | 120,000 | ||
| Fixed selling and administrative expense | 70,000 | 190,000 | 70,000 | 190,000 |
| Net operating income | 18,000 | (34,000) | ||
2.
To determine
Introduction: Absorption costing is a technique for calculating cost of product by taking indirect expense and direct cost into consideration.
To prepare: Traditional format income statement and Contribution format income statement
2.
Expert Solution
Answer to Problem 1AE
Traditional format income statement and Contribution format income statement is given below:
Explanation of Solution
| Data | Amount $ | `Amount $ |
| Selling price per unit | 75 | |
| Manufacturing cost | ||
| Variable per unit product | ||
| Direct material | 12 | |
| Direct labor | 5 | |
| Variable manufacturing overhead | 7 | |
| Fixed manufacturing overhead per year | 150000 | |
| Selling and administrative expenses | ||
| Variable per unit sold | 1 | |
| Fixed per year | 60000 | |
| Year 1 | Year 2 | |
| Units in beginning inventory | 0 | |
| Units produced during the year | 15000 | 10000 |
| Units sold during the year | 12000 | 12000 |
| Contrasting variable and absorption costing | ||
| Ending inventory | ||
| Units beginning inventory | 0 | 3000 |
| Units product during the year | 15000 | 10000 |
| Unit sold during the year | 12000 | 12000 |
| Units in ending inventory | 3000 | 1000 |
| The absorption costing units product cost | ||
| Direct material | 12 | 12 |
| Direct labor | 5 | 5 |
| Variable manufacturing overhead | 7 | 7 |
| Fixed manufacturing overhead | 10 | 24 |
| Absorption costing per unit product cost | 24 | 24 |
| The absorption costing income statement | ||
| Sales | 900,000 | 900,000 |
| Cost of goods | 408,000 | 458,000 |
| Gross margin | 492,000 | 442,000 |
| Selling and administrative expense | 72,000 | 72,000 |
| Net operating income | 420,000 | (37,000) |
| The variable costing unit products cost | ||
| Direct materials | 12 | 12 |
| Direct labor | 5 | 5 |
| Variable manufacturing overhead | 7 | 7 |
| Variable costing units production cost | 24 | 24 |
| Data | Year 1 | Year 2 | ||
| Amount $ | Amount $ | Amount $ | Amount $ | |
| Variable costing income statement. | 900,000 | 900,000 | ||
| Sales | ||||
| Variable expense | ||||
| Variable cost of goods sold | 288,000 | 2,880,000 | ||
| Variable selling and administrative expense | 12,000 | 300,000 | 12,000 | 300,000 |
| Contribution margin | 600,000 | 600,000 | ||
| Fixed expense | ||||
| Fixed manufacturing overhead | 150,000 | 120,000 | ||
| Fixed selling and administrative expense | 60,000 | 210,000 | 70,000 | 120,000 |
| Net operating income | 390,000 | (390,000) | ||
3.
To determine
Introduction: Absorption costing is a technique for calculating cost of product by taking indirect expense and direct cost into consideration.
To prepare: Traditional format income statement and Contribution format income statement
3.
Expert Solution
Answer to Problem 1AE
Income statement and Contribution format income statement is given below:
Explanation of Solution
| Data | Amount $ | `Amount $ |
| Selling price per unit | 75 | |
| Manufacturing cost | ||
| Variable per unit product | ||
| Direct material | 12 | |
| Direct labor | 5 | |
| Variable manufacturing overhead | 7 | |
| Fixed manufacturing overhead per year | 150,000 | |
| Selling and administrative expenses | ||
| Variable per unit sold | 1 | |
| Fixed per year | 60,000 | |
| Year 1 | Year 2 | |
| Units in beginning inventory | 0 | |
| Units produced during the year | 15,000 | 50,000 |
| Units sold during the year | 12,000 | 12,000 |
| Contrasting variable and absorption costing | ||
| Ending inventory | ||
| Units beginning inventory | 0 | 3,000 |
| Units product during the year | 15,000 | 50,000 |
| Unit sold during the year | 12,000 | 12,000 |
| Units in ending inventory | 3,000 | 41,000 |
| The absorption costing units product cost | ||
| Direct material | 12 | 12 |
| Direct labor | 5 | 5 |
| Variable manufacturing overhead | 7 | 7 |
| Fixed manufacturing overhead | 10 | 3 |
| Absorption costing per unit product cost | 34 | 27 |
| The absorption costing income statement | ||
| Sales | 900,000 | 900,000 |
| Cost of goods | 408,000 | 324,000 |
| Gross margin | 492,000 | 576,000 |
| Selling and administrative expense | 72,000 | 72,000 |
| Net operating income | 420,000 | (504,000) |
| The variable costing unit products cost | ||
| Direct materials | 12 | 12 |
| Direct labor | 5 | 5 |
| Variable manufacturing overhead | 7 | 7 |
| Variable costing units production cost | 24 | 24 |
| Data | Year 1 | Year 2 | ||
| Amount $ | Amount $ | Amount $ | Amount $ | |
| Variable costing income statement. | 900,000 | 900,000 | ||
| Sales | ||||
| Variable expense | ||||
| Variable cost of goods sold | 288000 | 2880,000 | ||
| Variable selling and administrative expense | 12000 | 300,000 | 12,000 | 300,000 |
| Contribution margin | 600,000 | 600,000 | ||
| Fixed expense | ||||
| Fixed manufacturing overhead | 150000 | 150,000 | ||
| Fixed selling and administrative expense | 60000 | 210,000 | 60,000 | 210,000 |
| Net operating income | 390,000 | 390,000 | ||
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Chapter 4 Solutions
MANAGERIAL ACCOUNTING W/ACCESS
Ch. 4 - Prob. 4.1QCh. 4 - Prob. 4.2QCh. 4 - Prob. 4.3QCh. 4 - Prob. 4.4QCh. 4 - Prob. 4.5QCh. 4 - Prob. 4.6QCh. 4 - Prob. 4.7QCh. 4 - Prob. 4.8QCh. 4 - Prob. 4.9QCh. 4 - Prob. 4.10Q
Ch. 4 - Prob. 4.11QCh. 4 - Prob. 4.12QCh. 4 - Prob. 4.13QCh. 4 - Prob. 4.14QCh. 4 - Prob. 4.15QCh. 4 - Prob. 4.16QCh. 4 - Prob. 4.17QCh. 4 - Prob. 1AECh. 4 - Prob. 1TF15Ch. 4 - Prob. 4.1ECh. 4 - Prob. 4.2ECh. 4 - Prob. 4.3ECh. 4 - Prob. 4.4ECh. 4 - Prob. 4.5ECh. 4 - Prob. 4.6ECh. 4 - Prob. 4.7ECh. 4 - Prob. 4.8ECh. 4 - Prob. 4.9ECh. 4 - Prob. 4.10ECh. 4 - Prob. 4.11ECh. 4 - Prob. 4.12ECh. 4 - Prob. 4.13ECh. 4 - Prob. 4.14ECh. 4 - Prob. 4.15ECh. 4 - Prob. 4.16ECh. 4 - Prob. 4.17ECh. 4 - Prob. 4.18PCh. 4 - Prob. 4.19PCh. 4 - Prob. 4.20PCh. 4 - Prob. 4.21PCh. 4 - Prob. 4.22PCh. 4 - Prob. 4.23PCh. 4 - Prob. 4.24PCh. 4 - Prob. 4.25PCh. 4 - Prob. 4.26PCh. 4 - Prob. 4.27PCh. 4 - Prob. 4.28PCh. 4 - Prob. 4.29CCh. 4 - Prob. 4.30C
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