Exercises 18-45 (Static) Full vs. Variable Costing [LO 18-3, 18-4] Security Technology Incorporated (STI) is a manufacturer of an electronic control system used in the manufacture of certain duty auto transmissions used primarily for police and military applications. The part sells for $55 per unit and STI had sales units in the current year, 2021. STI had no inventory on hand at the beginning of 2021 and is projecting sales of 26,000 unit STI is planning the same production level for 2022 as in 2021, 25,000 units. The variable manufacturing costs for STI are $ variable selling costs are only $0.50 per unit. The fixed manufacturing costs are $200,000 per year, and the fixed selling co $500 per year. Required: 1. Prepare an income statement for each year using full costing. 2. Prepare an income statement for each year using variable costing. 3. Prepare a reconciliation of the difference each year in the operating income resulting from the full and variable costing m

Exercises 18-45 (Static) Full vs. Variable Costing [LO 18-3, 18-4] Security Technology Incorporated (STI) is a manufacturer of an electronic control system used in the manufacture of certain duty auto transmissions used primarily for police and military applications. The part sells for $55 per unit and STI had sales units in the current year, 2021. STI had no inventory on hand at the beginning of 2021 and is projecting sales of 26,000 unit STI is planning the same production level for 2022 as in 2021, 25,000 units. The variable manufacturing costs for STI are $ variable selling costs are only $0.50 per unit. The fixed manufacturing costs are $200,000 per year, and the fixed selling co $500 per year. Required: 1. Prepare an income statement for each year using full costing. 2. Prepare an income statement for each year using variable costing. 3. Prepare a reconciliation of the difference each year in the operating income resulting from the full and variable costing m

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter20: Inventory Management: Economic Order Quantity, Jit, And The Theory Of Constraints

Section: Chapter Questions

Problem 7E: Ottis, Inc., uses 640,000 plastic housing units each year in its production of paper shredders. The...

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9-39 CVP Analysis; Profit Planning Horton Manufacturing Inc. (HMI) is suffering from the effects of increased local and global competition for its main product, a lawn mower that is sold in discount stores throughout the United States. The following table shows the results of HMI's operations for 2019: [LO 9-3, 9-5] $ 1,050,000 Sales (12,500 units @ $84) Variable costs (12,500 @ $63) Contribution margin 787,500 $ 262,500 Fixed costs 296,100 Operating profit (loss) ($ 33,600) Required 1. Compute HMI's breakeven point in both units and dollars. Also, compute the contribution margin ratio. (Round the number of units up to the next whole number.) 2. What would be the required sales, in units and in dollars, to generate a pretax profit of $30,000? (Round the number of units up to the next whole number) 3. Assume an income tax rate of 40%. What would be the required sales volume, in both units and dollars, to generate an after-tax profit of $30,000? (Round the number of units up to the next…
6. Problem 16-11 (Algo) One of your Taiwanese suppliers has bid on a new line of molded plastic parts that is currently being assembled at your plant. The supplier has bid $0.10 per part, given a forecast you provided of 100,000 parts in year 1; 200,000 in year 2; and 300,000 in year 3. Shipping and handling of parts from the supplier’s factory is estimated at $0.01 per unit. Additional inventory handling charges should amount to $0.005 per unit. Finally, administrative costs are estimated at $20 per month. Although your plant is able to continue producing the part, the plant would need to invest in another molding machine, which would cost $10,000. Direct materials can be purchased for $0.04 per unit. Direct labor is estimated at $0.02 per unit for wages plus a 50 percent surcharge for benefits and, indirect labor is estimated at $0.010 per unit plus 50 percent benefits. Up-front engineering and design costs will amount to $30,000. Finally, management has insisted that…
Preparing variable and absorption costing income statements This problem continues the Piedmont Computer Problem situation from Chapter 20. Piedmont Computer Company manufactures personal computers and tablets. Based on the latest information from the cost accountant, using the current sales mix, the weighted-average sales price per unit is $750 and the weighed-average variable cost per unit is $450. The company does not expect the sales mix to vary for the next year. Assume the beginning balance in Finished Goods Inventory is $0. Additional data for the first month of 2020: Requirements Compute the product cost per unit produced under absorption costing and under variable costing. Prepare income statements for January 2020 using: absorption costing. variable costing. 3. Is operating income higher under absorption costing or variable costing in January? What causes the difference?
Required information Skip to question [The following information applies to the questions displayed below.] Horton Manufacturing Incorporated (HMI) is suffering from the effects of increased local and global competition for its main product, a lawn mower that is sold in discount stores throughout the United States. The following table shows the results of HMI’s operations for the most recent year: Sales (12,500 units @ $84) $ 1,050,000 Variable costs (12,500 @ $63) 787,500 Contribution margin $ 262,500 Fixed costs 296,100 Operating profit (loss) $ (33,600) Required: 1. Compute HMI’s breakeven point in both units and dollars. Also, compute the contribution margin ratio. 2. What would be the required sales, in units and in dollars, to generate a pretax profit of $30,000? 3. Assume an income tax rate of 40%. What would be the required sales volume, in both units and dollars, to generate an after-tax profit of $30,000? 4. Prepare a contribution income statement…
Figure 2 Hapsburg Manufacturing purchases components produced by Little Company in the manufacture of its main product. For the next year, Hapsburg expects to use a total of 20,000 parts. Hapsburg typically orders 2,000 units at a time. The cost of placing an order is GHS100, and the average annual cost of carrying one unit of inventory is GHS5. 18. Refer to Figure 2. Hapsburg's total ordering cost is a. GHS1,000. b. GHS5,000. c. GHS10,000. d. GHS500.
Knowledge Check 01 Walton Corporation is currently selling 104 units of its product. The company is deciding the price that it should charge for a bulk order of 40 units. The variable cost per unit is $200. This order will not involve any additional fixed costs and the company's current sales wll not be affected. The company targets a profit of $4,000 on the bulk order. What selling price per unit should the company quote for the bulk order? (Round your answer to the nearest whole dollar.) Selling Price Per Unit
X corporation produces a decorative pillow. In 2020, it produced 2,000 units a 1,750 at an average selling price of $75 per unit. The following additional information r corporation for 2020: Beginning inventory Variable manufacturing costs Variable marketing costs Fixed manufacturing costs Administrative expenses, all fixed 0 $20.00 per unit $ 3.00 per unit $ 7.00 per unit $15.00 per unit D) $45 11) What is cost of goods sold per unit using variable costing? A) $20 B) $23 C) $30 D) $54,000 12) What is cost of goods sold using absorption costing? A) $35,000 B) $40,000 C) $47,250 D) $110,000 13) What is contribution margin using variable costing? A) $96,250 B) $91,000 C) $104,000
Cost-Based Pricingand Markups with Variable CostsCompu Services provides computerized inventory consulting. The office and computer expenses are $600,000 annually and are not assigned to specific jobs. The consulting hours available for the year total 20,000, and the average consulting hour has $30 of variable costs.(a) If the company desires a profit of $160,000, what should it charge per hour?$Answer(b) What is the markup on variable costs if the desired profit is $240,000?Answer %(c) If the desired profit is $60,000, what is the markup on variable costs to cover (1) unassigned costs and (2) desired profit?Markup to cover unassigned costs Answer %Markup to cover desired profits Answer %
Question 2 XYZ Company produces and sells only two products since year 2000. Data concerning those products for March 2020 appear below: Product A Product B March Sales $25,000 $27,000 March Variable costs $7,000 $8,600 March Fixed costs $32,860 Required: As a Senior Manager at XYZ Company, your General Manager asked you to determine the total sales of the company in $ for product A and for product B that should be achieved to cover both variable and fixed costs for the month of March by using the company's contribution margin. The level of competition in the market was acceptable and manageable by the Company. In March, 2020, a new potential competitor is doing a market research to decide on entering the market with a product similar to Product A. The General Manager asked for your advice if the company should shift the sales mix toward Product B with no change in total sales (as the sales of product B is more than product…
Relevant-cost approach to short-run pricing decisionsAlexon SL is an electronics business with eight product lines. Profit data for one of the products (XT-107) for themonth just ended (June 2018) are as follows:Sales, 200 000 units at average price of €100Variable costsDirect materials at €35 per unitDirect manufacturing labor at €10 per unit€7 000 0002 000 000€20 000 000Variable manufacturing overhead at €5 per unit 1 000 000Sales commissions at 15% of sales 3 000 000Other variable costs at €5 per unitTotal variable costs 1 000 000 14 000 000Contribution margin 6 000 000Fixed costsOperating profit5 000 000€1 000 000Xuclà Mecàniques Fluvià SA, an instruments company, has a problem with its preferred supplierof XT-107 component products. This supplier has had a three-week strike and will not be able tosupply Xuclà 3000 units next month. Xuclà approaches the sales representative of Alexon SL,Angela Zamora, about providing 3000 units of XT-107 at a price of €80 per unit. Zamorainforms…
Structuring a Special-Order Problem The Millenium Company has been approached by a new customer with an offer to purchase 10,000 units of its model F80 at a price of $4.10 each. The new customer is geographically separated from the company's other customers, and existing sales would not be affected. Millenium normally produces 75,000 units of F80 per year but only plans to produce and sell 60,000 in the coming year. The normal sales price is $12 per unit. Unit cost information for the normal level of activity is as follows: Direct materials $1.75 Direct labor 2.50 Variable overhead 1.50 Fixed overhead 3.25 Total $9.00 Fixed overhead will not be affected by whether or not the special order is accepted. Required: 1. Should the company accept or reject the special order? 2. By how much will operating income increase or decrease if the order is accepted? by
1. (Appendix) Assuming that the variable cost method is used, determine the following: Line Item Description Answer a. Variable cost amount per unit $ b. Markup percentage % c. Selling price per unit $ 2. Assume that as of October 31, 16,000 units of flat panel displays have been produced and sold during the current year. Analysis of the domestic market indicates that 2,500 additional units are expected to be sold during the remainder of the year at the normal product price determined under the product cost method. On November 5, Digital Displays Inc. received an offer from Andes Visual Inc. for 1,000 units of flat panel displays at $225 each. Andes Visual Inc. will market the units in Peru under its own brand name, and no variable selling and administrative expenses associated with the sale will be incurred by Digital Displays Inc. The additional business is not expected to affect the domestic sales of flat panel displays, and the additional units could be produced…