COST ACCOUNTING
16th Edition
ISBN: 9781323694008
Author: Horngren
Publisher: PEARSON C
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Chapter 9, Problem 9.31E
Variable and absorption costing and breakeven points. Camino, a leading firm in the sports industry, produces basketballs for the consumer market. For the year ended December 31, 2017, Camino sold 400,0 basketballs at an average selling price of $12 per unit. The following information also relates to 2017 (assume constant unit costs and no variances of any kind):
Inventory, January 1, 2017: 0 basketballs
Inventory, December 31, 2017: 20,000 basketballs
Fixed
Fixed administrative costs: $660,000
Direct materials costs: $ 3 per basketball
Direct labor costs: $ 4 per basketball
- 1. Prepare income statements under (a) variable, (b) absorption, and (c) throughput costing for the year ended December 31, 2017.
- 2. Calculate the breakeven point (in basketballs sold) in 2017 under:
- a. Variable costing
- b. Absorption costing
- c. Throughput costing
- 3. Suppose direct materials costs were $4 per basketball instead. Assuming all other data are the same, calculate the minimum number of basketballs Camino must have sold in 2017 to attain a target operating income of $120,000 under:
- a. Variable costing
- b. Absorption costing
- c. Throughput costing
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Chapter 9 Solutions
COST 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...
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