Rob Kapito, the controller of Blackstar Paint Supply Company, has been exploring a variety of internal accounting systems. Rob hopes to get the input of Blackstar's board of directors in choosing one. To prepare for his presentation to the board, Rob applies four different cost accounting methods to the firm's operating data for 2017. The four methods are actual absorption costing, normal absorption costing, standard absorption costing, and standard variable costing. With the help of a junior accountant, Rob prepares the following alternative income statements: в $ 900,000 $375,000 $ 900,000 $ 250,000 $ 900,000 $420,000 $ 900,000 $ 395,000 Sales Revenue Cost of Goods Sold (+) Variances: Direct Materials 15,000 15,000 Direct Labor 5,000 5,000 25,000 Manufacturing Overhead (+) Other Costs (All Fixed) 25,000 350,000 $ 770,000 $ 130,000 475,000 350,000 $ 770,000 $ 130,000 350,000 $ 745,000 $ 155,000 $ 770,000 $ 130,000 Total Costs Net Income Where applicable, Rob allocates both fixed and variable manufacturing overhead using direct labor hours as the driver. Blackstar carries no work-in-process inventory. Standard costs have been stable over time, and Rob writes off all variances to cost of goods sold. For 2017, there was no flexible budget variance for fixed overhead. In addition, the direct labor variance represents a price variance.
Rob Kapito, the controller of Blackstar Paint Supply Company, has been exploring a variety of internal accounting systems. Rob hopes to get the input of Blackstar's board of directors in choosing one. To prepare for his presentation to the board, Rob applies four different cost accounting methods to the firm's operating data for 2017. The four methods are actual absorption costing, normal absorption costing, standard absorption costing, and standard variable costing. With the help of a junior accountant, Rob prepares the following alternative income statements: в $ 900,000 $375,000 $ 900,000 $ 250,000 $ 900,000 $420,000 $ 900,000 $ 395,000 Sales Revenue Cost of Goods Sold (+) Variances: Direct Materials 15,000 15,000 Direct Labor 5,000 5,000 25,000 Manufacturing Overhead (+) Other Costs (All Fixed) 25,000 350,000 $ 770,000 $ 130,000 475,000 350,000 $ 770,000 $ 130,000 350,000 $ 745,000 $ 155,000 $ 770,000 $ 130,000 Total Costs Net Income Where applicable, Rob allocates both fixed and variable manufacturing overhead using direct labor hours as the driver. Blackstar carries no work-in-process inventory. Standard costs have been stable over time, and Rob writes off all variances to cost of goods sold. For 2017, there was no flexible budget variance for fixed overhead. In addition, the direct labor variance represents a price variance.
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter11: Differential Analysis And Product Pricing
Section: Chapter Questions
Problem 1TIF: Aaron McKinney is a cost accountant for Majik Systems Inc. Martin Dodd, Vice President of Marketing,...
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From the four income statements, can you determine how the actual volume of production during the year compared to the denominator (expected) volume level?
Transcribed Image Text:Rob Kapito, the controller of Blackstar Paint
Supply Company, has been exploring a variety of internal accounting systems. Rob hopes to get the input
of Blackstar's board of directors in choosing one. To prepare for his presentation to the board, Rob applies
four different cost accounting methods to the firm's operating data for 2017. The four methods are actual
absorption costing, normal absorption costing, standard absorption costing, and standard variable costing.
With the help of a junior accountant, Rob prepares the following alternative income statements:
в
$ 900,000
$375,000
$ 900,000
$ 250,000
$ 900,000
$420,000
$ 900,000
$ 395,000
Sales Revenue
Cost of Goods Sold
(+) Variances:
Direct Materials
15,000
15,000
Direct Labor
5,000
5,000
25,000
Manufacturing Overhead
(+) Other Costs (All Fixed)
25,000
350,000
$ 770,000
$ 130,000
475,000
350,000
$ 770,000
$ 130,000
350,000
$ 745,000
$ 155,000
$ 770,000
$ 130,000
Total Costs
Net Income
Where applicable, Rob allocates both fixed and variable manufacturing overhead using direct labor hours as
the driver. Blackstar carries no work-in-process inventory. Standard costs have been stable over time, and
Rob writes off all variances to cost of goods sold. For 2017, there was no flexible budget variance for fixed
overhead. In addition, the direct labor variance represents a price variance.
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