The P. Talbot Company was organized just one month ago.  The company manufactures and sells a unique product that has been quickly accepted by consumers.  The results of the company’s first month of operations are shown below (absorption costing basis):                           Sales (10,000 units @ $20)                                        $200,000                         Less Cost of Goods Sold                                             140,000                         Gross Margin                                                                60,000                         Less Selling and Administrative expenses                   45,000                         Net Income                                                                 $15,000   Variable selling and administrative expenses are $2 per unit.  The company produced 12,000 units during the month.  Variable manufacturing costs total $10 per unit, and fixed manufacturing overhead costs total $48,000 per month.     What is the ending inventory value using full-absorption costing?_________         Using a Variable costing basis Income statement: What would be the Contribution margin?_____________________       What would be the net income/loss? ________________________           Reconcile the variable costing and absorption costing net income figures.

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 16E
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The P. Talbot Company was organized just one month ago.  The company manufactures and sells a unique product that has been quickly accepted by consumers.  The results of the company’s first month of operations are shown below (absorption costing basis):

 

                        Sales (10,000 units @ $20)                                        $200,000

                        Less Cost of Goods Sold                                             140,000

                        Gross Margin                                                                60,000

                        Less Selling and Administrative expenses                   45,000

                        Net Income                                                                 $15,000

 

Variable selling and administrative expenses are $2 per unit.  The company produced 12,000 units during the month.  Variable manufacturing costs total $10 per unit, and fixed manufacturing overhead costs total $48,000 per month.

 

 

  1. What is the ending inventory value using full-absorption costing?_________

 

 

 

 

  1. Using a Variable costing basis Income statement:

What would be the Contribution margin?_____________________

 

 

 

What would be the net income/loss? ________________________

 

 

 

 

 

  1. Reconcile the variable costing and absorption costing net income figures.

 

The P. Talbot Company was organized just one month ago. The company manufactures
and sells a unique product that has been quickly accepted by consumers. The results of
the company's first month of operations are shown below (absorption costing basis):
Sales (10,000 units @ $20)
$200,000
140,000
60,000
45,000
$15,000
Less Cost of Goods Sold
Gross Margin
Less Selling and Administrative expenses
Net Income
Variable selling and administrative expenses are $2 per unit. The company produced 12,000
units during the month. Variable manufacturing costs total $10 per unit, and fixed
manufacturing overhead costs total $48,000 per month.
a) What is the ending inventory value using full-absorption costing?
b) Using a Variable costing basis Income statement:
What would be the Contribution margin?
What would be the net income/loss?
c) Reconcile the variable costing and absorption costing net income figures.
Transcribed Image Text:The P. Talbot Company was organized just one month ago. The company manufactures and sells a unique product that has been quickly accepted by consumers. The results of the company's first month of operations are shown below (absorption costing basis): Sales (10,000 units @ $20) $200,000 140,000 60,000 45,000 $15,000 Less Cost of Goods Sold Gross Margin Less Selling and Administrative expenses Net Income Variable selling and administrative expenses are $2 per unit. The company produced 12,000 units during the month. Variable manufacturing costs total $10 per unit, and fixed manufacturing overhead costs total $48,000 per month. a) What is the ending inventory value using full-absorption costing? b) Using a Variable costing basis Income statement: What would be the Contribution margin? What would be the net income/loss? c) Reconcile the variable costing and absorption costing net income figures.
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