REVEL for Horngren's Cost Accounting: A Managerial Emphasis -- Access Card (16th Edition) (What's New in Accounting)
16th Edition
ISBN: 9780134789705
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
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Textbook Question
Chapter 9, Problem 9.28E
Candyland uses
- 1. What denominator level is Candyland using to allocate fixed
manufacturing costs to the candy? How is Candyland disposing of any favorable or unfavorable production-volume variance at the end of the year? Explain your answer briefly. - 2. How did Candyland’s accountants arrive at the breakeven volume of 25,000 units?
- 3. Prepare a variable costing-based income statement for each year. Explain the variation in variable costing operating income for each year based on contribution margin per unit and sales volume.
- 4. Reconcile the operating incomes under variable costing and absorption costing for each year, and use this information to explain to Jack McCay the positive operating income in 2017 and the drop in operating income in 2018.
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Luke Corporation produces a variety of products, each within their own division. Last year, the managers at Luke developed and began marketing a new chewing gum, Bubbs, to sell in vending machines. The product, which sells for $5.25 per case, has not had the market success that managers expected and the company is considering dropping Bubbs.
The product-line income statement for the past 12 months follows:
Revenue
$
14,682,150
Costs
Manufacturing costs
$
14,440,395
Allocated corporate costs (@5%)
734,108
15,174,503
Product-line margin
$
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Allowance for tax (@20%)
98,470
Product-line profit (loss)
$
(393,883
)
All products at Luke receive an allocation of corporate overhead costs, which is computed as 5 percent of product revenue. The 5 percent rate is…
Luke Corporation produces a variety of products, each within their own division. Last year, the managers at Luke developed and began marketing a new chewing gum, Bubbs, to sell in vending machines. The product, which sells for $5.70 per case, has not had the market success that managers expected and the company is considering dropping Bubbs.
The product-line income statement for the past 12 months follows:
Revenue
$
14,695,650
Costs
Manufacturing costs
$
14,444,895
Allocated corporate costs (@5%)
734,783
15,179,678
Product-line margin
$
(484,028
)
Allowance for tax (@20%)
96,805
Product-line profit (loss)
$
(387,223
)
All products at Luke receive an allocation of corporate overhead costs, which is computed as 5 percent of product revenue. The 5 percent rate is computed based on the most recent year’s corporate cost as a percentage of revenue. Data on corporate costs and revenues for…
Leander Office Products Inc. produces and sells small storage and organizational products for office use. During the first month of
operations, the products sold well. Andrea Leander, the owner of the company, was surprised to see a loss for the month on her
income statement. This statement was prepared by a local bookkeeping service recommended to her by her bank manager. The
statement follows:
LEANDER OFFICE PRODUCTS INC.
Income Statement
Sales (43,000 units)
Variable expenses:
Variable cost of goods sold✶
Variable selling and administrative expenses
Contribution margin
Fixed expenses:
Fixed manufacturing overhead
Fixed selling and administrative expenses
Operating loss
$253,700
$116,530
49,880
166,410
87,290
89,586
17,200
106,786
$(19,496)
*Consists of direct materials, direct labour, and variable manufacturing overhead.
Leander is discouraged over the loss shown for the month, particularly since she had planned to use the statement to encourage
investors to purchase shares in the…
Chapter 9 Solutions
REVEL for Horngren's Cost Accounting: A Managerial Emphasis -- Access Card (16th Edition) (What's New in Accounting)
Ch. 9 - Differences in operating income between variable...Ch. 9 - Why is the term direct costing a misnomer?Ch. 9 - Do companies in either the service sector or the...Ch. 9 - Explain the main conceptual issue under variable...Ch. 9 - Companies that make no variable-cost/fixed-cost...Ch. 9 - The main trouble with variable costing is that it...Ch. 9 - Give an example of how, under absorption costing,...Ch. 9 - What are the factors that affect the breakeven...Ch. 9 - Critics of absorption costing have increasingly...Ch. 9 - What are two ways of reducing the negative aspects...
Ch. 9 - Prob. 9.11QCh. 9 - Describe the downward demand spiral and its...Ch. 9 - Will the financial statements of a company always...Ch. 9 - Prob. 9.14QCh. 9 - The difference between practical capacity and...Ch. 9 - In comparing the absorption and variable cost...Ch. 9 - Queen Sales, Inc. has just completed its first...Ch. 9 - King Tooling has produced and sold the following...Ch. 9 - The following information relates to Drexler Inc.s...Ch. 9 - Prob. 9.20MCQCh. 9 - Variable and absorption costing, explaining...Ch. 9 - Throughput costing (continuation of 9-21). The...Ch. 9 - Variable and absorption costing, explaining...Ch. 9 - Throughput costing (continuation of 9-23). The...Ch. 9 - Variable versus absorption costing. The Tomlinson...Ch. 9 - Absorption and variable costing. (CMA) Miami,...Ch. 9 - Absorption versus variable costing. Horace Company...Ch. 9 - Candyland uses standard costing to produce a...Ch. 9 - Capacity management, denominator-level capacity...Ch. 9 - Denominator-level problem. Thunder Bolt Inc., is a...Ch. 9 - Variable and absorption costing and breakeven...Ch. 9 - Variable costing versus absorption costing. The...Ch. 9 - Throughput Costing (continuation of 9-32) 1....Ch. 9 - Variable costing and absorption costing, the Z-Var...Ch. 9 - Comparison of variable costing and absorption...Ch. 9 - Effects of differing production levels on...Ch. 9 - Alternative denominator-level capacity concepts,...Ch. 9 - Motivational considerations in denominator-level...Ch. 9 - Denominator-level choices, changes in inventory...Ch. 9 - Variable and absorption costing and breakeven...Ch. 9 - Downward demand spiral. Market.com is about to...Ch. 9 - Absorption costing and production-volume...Ch. 9 - Operating income effects of denominator-level...Ch. 9 - Variable and absorption costing, actual costing....Ch. 9 - Prob. 9.45PCh. 9 - Cost allocation, responsibility accounting, ethics...Ch. 9 - Absorption, variable, and throughput costing....Ch. 9 - Costing methods and variances, comprehensive. Rob...
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