Introduction To Managerial Accounting
8th Edition
ISBN: 9781259917066
Author: BREWER, Peter C., Garrison, Ray H., Noreen, Eric W.
Publisher: Mcgraw-hill Education,
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Textbook Question
Chapter 7, Problem 2E
Variable Costing Income Statement; Explanation of Difference in Net Operating Income L07—2
Refer to the data in Exercise 7—1 for Ida Sidha Karya Company. The absorption costing income statement prepared accountant for last year appears as shown:
Required:
1. Under absorption costing, how much fixed
2. Prepare an income statement for last year using variable costing. What is the amount of the difference in net operating income betweenthe two costing methods?
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Accounting records for The Ralston Company show the following for the most recent fiscal year.
Units produced and sold
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Sales revenue
Direct materials costs
Direct labor costs
Variable manufacturing overhead
Fixed manufacturing overhead
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Prepare a gross margin income statement.
Gross Margin Income Statement
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Oak Mart, a producer of solid oak tables, reports the following data from its second year of business.
Sales price per unit
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Units produced this year
Units sold this year
300 per unit
115,000 units
118,250 units
3,250 units
Units in beginning-year inventory
Beginning inventory costs
Variable (3,250 units x $135)
Fixed (3,250 units x $80)
$ 438,750
260,000
Total
$
698,750
Manufacturing costs this year
Direct materials
$
Direct labor
$
Overhead costs this year
Variable overhead
$3,000,000
Fixed overhead
$7,400,000
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4,400,000
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1. Prepare the current-year income statement for the company using variable costing.
OAK MART COMPANY
Variable Costing Income Statement
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During Heaton Company's first two years of operations, the company reported absorption costing net operating income as follows:
Year 2
$ 1,827,000
1,073,000
754,000
333,000
$ 421,000
Year 1
Sales (@ $63 per unit)
Cost of goods sold (@ $37 per unit)
Gross margin
Selling and administrative expenses*
Net operating income
$1,197,000
703,000
494,000
303,000
$ 191,000
* $3 per unit variable; $246,000 fixed each year.
The company's $37 unit product cost is computed as follows:
Direct materials
Direct labor
Variable manufacturing overhead
Fixed manufacturing overhead ($456,000 - 24,000 units)
Absorption costing unit product cost
9
8
1
19
$ 37
Forty percent of fixed manufacturing overhead consists of wages and salaries; the remainder consists
of depreciation charges on production equipment and buildings.
Production and cost data for the two years are:
Units produced
Units sold
Year 1
24,000
19,000
Year 2
24,000
29,000
Required:
1. Prepare a variable costing contribution format income statement…
Chapter 7 Solutions
Introduction To Managerial Accounting
Ch. 7 - What is the difference between absorption costing...Ch. 7 - Are selling and administrative expenses treated as...Ch. 7 - Explain how fixed manufacturing overhead costs are...Ch. 7 - What are the arguments in favor of treating fixed...Ch. 7 - What are the arguments in favor of treating fixed...Ch. 7 - Prob. 6QCh. 7 - If the units produced exceed the units sold, which...Ch. 7 - Prob. 8QCh. 7 - Prob. 9QCh. 7 - How does Lean Production reduce or eliminate the...
Ch. 7 - Prob. 11QCh. 7 - Prob. 12QCh. 7 - Distinguish between a traceable fixed cost and a...Ch. 7 - Explain how the contribution margin differs from...Ch. 7 - Why aren’t common fixed costs allocated to...Ch. 7 - How is it possible for a fixed cost that ¡s...Ch. 7 - Should a company allocate its common fixed costs...Ch. 7 - Prob. 1AECh. 7 - Prob. 2AECh. 7 - Prob. 3AECh. 7 - Diego Company manufactures one product that is...Ch. 7 - Prob. 2F15Ch. 7 - Prob. 3F15Ch. 7 - Prob. 4F15Ch. 7 - Diego Company manufactures one product that is...Ch. 7 - Prob. 6F15Ch. 7 - Diego Company manufactures one product that is...Ch. 7 - Prob. 8F15Ch. 7 - Diego Company manufactures one product that is...Ch. 7 - Prob. 10F15Ch. 7 - Prob. 11F15Ch. 7 - Prob. 12F15Ch. 7 - Prob. 13F15Ch. 7 - Diego Company manufactures one product that is...Ch. 7 - Diego Company manufactures one product that is...Ch. 7 - Prob. 1ECh. 7 - Variable Costing Income Statement; Explanation of...Ch. 7 - Reconciliation of Absorption and Variable Costing...Ch. 7 - Prob. 4ECh. 7 - Prob. 5ECh. 7 - Prob. 6ECh. 7 - Prob. 7ECh. 7 - Deducing Changes ¡n Inventories LO7—3 Parker...Ch. 7 - Variable and Absorption Costing Unit Product Costs...Ch. 7 - Prob. 10ECh. 7 - Segmented Income Statement L07—4 Wingate Company,...Ch. 7 - Prob. 12ECh. 7 - Prob. 13ECh. 7 - Variable Costing Unit Product Cost and Income...Ch. 7 - Absorption Costing Unit Product Cost and Income...Ch. 7 - Working with a Segmented Income Statement;...Ch. 7 - Prob. 17ECh. 7 - Prob. 18PCh. 7 - Variable Costing Income Statement; Reconciliation...Ch. 7 - Variable and Absorption Costing Unit Product Costs...Ch. 7 - Segment Reporting and Decision-Making L07—4 Vulcan...Ch. 7 - Prob. 22PCh. 7 - Absorption and Variable Costing; Production...Ch. 7 - Companywide and Segment Break-Even Analysis;...Ch. 7 - Prepare and Interpret Income Statements; Changes...Ch. 7 - Prob. 26PCh. 7 - Variable and Absorption Costing Unit Product Costs...
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