Sales Production Selling price Costs (all fixed): Manufacturing Operating (nonmanufacturing) 2016 30,000 tons 60,000 tons 2$ 2017a 30,000 tons O tons 90 per ton 90 per ton $2,580,000 $2,580,000 $ 102,000 $ 102,000 1. Prepare income statements with one column for 2016, one column for 2017, and one column for the two years together using (a) variable costing and (b) absorption costing. 2. What is the breakeven point under (a) variable costing and (b) absorption costing? 3. What inventory costs would be carried in the balance sheet on December 31, 2016 and 2017 under each method? 4. Assume that the performance of the top manager of Z-Var is evaluated and rewarded largely on the Required basis of reported operating income. Which costing method would the manager prefer? Why?

Witt Recreation Company (WRC) makes e-bikes. The company currently manufactures two models, the Coaster and the Traveler, in one of the WRC factories. Both models require the same assembling operations. The difference between the models is the cost of materials. The following data are available for the second quarter. Number of bikes assembled Materials cost per bike Other costs: Direct labor Depreciation and lease Supervision and control Factory administration Operation cost Materials cost Total cost Unit cost Coaster 750 $626 Coaster Traveler 450 $ 1,202 Required: Witt Recreation Company uses operations costing and assigns conversion costs based on the number of units assembled. Compute the cost of each model assembled in the second quarter. Note: Do not round intermediate calculations. Round your final answers to nearest whole number. Total 1,200 Traveler $ 299,400 382,400 247,400 340,400 Total

Following a strategy of product differentiation, Cold Lake Company makes a high-end appliance, AP15. Cold Lake Company presents the data in the table for years 1 and 2. (Click the icon to view the table.) Cold Lake Company produces no defective units, but it wants to reduce direct materials usage per unit of AP15 in year 2. Manufacturing conversion costs in each year depend on production capacity, defined in terms of AP15 units that can be produced. Selling and customer-service costs depend on the number of customers that the customer and service functions are designed to support. Neither conversion costs nor customer-service costs are affected by changes in actual volume. Cold Lake Company has 46 customers in year 1 and 50 customers in year 2. The industry market size for high-end appliances increased 5% from year 1 to year 2. What is the Cold Lake Company's operating income in Year 2? OA. $200,000 OB. $188,000 OC. $4,620,000 OD. $1,440,000 OE. $1,804,500

The Chopin Company has decided to introduce a new product. The new product can be manufactured by either a computer-assisted manufacturing (CAM) or a labor-intensive production (LIP) system. The manufacturing method will not affect the quality of the product. The estimated manufacturing costs for each of the two methods are as follows. CAM System: Direct Material = $5.0 Direct Labor (DLH) = 0.5 DLH X $12 = $6 Variable Overhead = 0.5DLHx$6 = $3 Fixed Iverhead* = $ 2,440,000 LIP System: Direct Material = $5.6 Direct Labor (DLH) = 0.8 DLH X $9 = $7.2 Variable Overhead = 0.8 DLH X $6 = $4.8 Fixed Overhead* = $1,320,000 *These costs are directly traceable to the new product line. They would not be incurred if the new product were not produced. The company’s marketing research department has recommended an introductory unit sales price of $30. Selling expenses are estimated to be $500,000 annually plus $2 for each unit sold. (Ignore income taxes.) Required: Calculate the estimated…

DK manufactures three products, W, X and Y. Each product uses the same materials and the same type of direct labour but in different quantities. The company currently uses a cost plus basis to determine the selling price of its products. This is based on full cost using an overhead absorption rate per direct labour hour. However, the managing director is concerned that the company may be losing sales because of its approach to setting prices. He thinks that a marginal costing approach may be more appropriate, particularly since the workforce is guaranteed a minimum weekly wage and has a three month notice period.e a) Given the managing director's concern about DK's approach to setting selling prices, discuss the advantages and disadvantages of marginal cost plus pricing AND total cost-plus pricing. The direct costs of the three products are shown below: Product- Budgeted annual production (units) 15,000- 24,000 20,000 $ per unita $ per unite $ per unita Direct materials 354 40 45a…

Required information [The following information applies to the questions displayed below.] Celestial Products, Inc., has decided to introduce a new product, which can be manufactured by either a computer- assisted manufacturing system or a labor-intensive production system. The manufacturing method will not affect the quality of the product. The estimated manufacturing costs by the two methods are as follows: Direct material Direct labor (DLH denotes direct-labor hours) Variable overhead Fixed overhead* Computer-Assisted Manufacturing System $ Volume 0.5DLH @ $25.50 0.5DLH @ $16.50 9.00 12.75 8.25 $4,410,000 units Labor-Intensive Production System $ 0.8DLH @ $21.00 0.8DLH @ $16.50 *These costs are directly traceable to the new product line. They would not be incurred if the new product were not produced. 9.90 16.80 13.20 $2,730,000 The company's marketing research department has recommended an introductory unit sales price of $75.00. Selling expenses are estimated to be $900,000…

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