Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
16th Edition
ISBN: 9780134475585
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
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Chapter 9, Problem 9.44P

Variable and absorption costing, actual costing. The Iron City Company started business on January 1, 2017. Iron City manufactures a specialty honey beer, which it sells directly to state-owned distributors in Pennsylvania. Honey beer is produced and sold in six-packs, and in 2017, Iron City produced more six-packs than it was able to sell. In addition to variable and fixed manufacturing overhead, Iron City incurred direct materials costs of $880,000, direct manufacturing labor costs of $400,000, and fixed marketing and administrative costs of $295,000 For the year Iron City sold a total of 180,000 six-parks for a sales revenue of $2,250,000.

Iron City’s CFO is convinced that the firm should use an actual costing system but is debating whether to follow variable or absorption costing. The controller notes that Iron City’s operating income for the year would be $438,000 under variable costing and $461,000 under absorption costing. Moreover the ending finished-goods inventory would be valued at $7.15 under variable costing and $8.30 under absorption costing.

Iron City incurs no variable nonmanufacturing expenses.

  1. 1. What is Iron City’s total contribution margin for 2017?
  2. 2. Iron City incurs fixed manufacturing costs in addition to its fixed marketing and administrative costs. How much did Iron City incur in fixed manufacturing costs in 2017?
  3. 3. How many six-packs did Iron City produce in 2017?
  4. 4. How much in variable manufacturing overhead did Iron City incur in 2017?
  5. 5. For 2017, how much in total manufacturing overhead is expensed under variable costing, either through cost of goods sold or as a period expense?
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Chapter 9 Solutions

Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)

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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Cost Accounting - Definition, Purpose, Types, How it Works?; Author: WallStreetMojo;https://www.youtube.com/watch?v=AwrwUf8vYEY;License: Standard YouTube License, CC-BY