Managerial Accounting
15th Edition
ISBN: 9781337912020
Author: Carl Warren, Ph.d. Cma William B. Tayler
Publisher: South-Western College Pub
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Chapter 7, Problem 3CMA
To determine
Identify the amount of income reported under absorption costing would higher or lower than variable costing.
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Review the income statements on the Absorption Statement and Variable Statement panels, then complete the following table. The company’s sales price per unit is $75.00, and the number of units in ending inventory is 5,000.
Item
Amount
Number of units sold
Â
Variable sales and administrative cost per unit
Â
Number of units manufactured
Â
Variable cost of goods manufactured per unit
Â
Fixed manufacturing cost per unit
Â
Saxon, Inc.
Absorption Costing Income Statement
For the Year Ended December 31
1
Sales
Â
$1,125,000.00
2
Cost of goods sold:
Â
Â
3
Beginning inventory
$0.00
Â
4
Cost of goods manufactured
840,000.00
Â
5
Ending inventory
(210,000.00)
Â
6
Total cost of goods sold
Â
630,000.00
7
Gross profit
Â
$495,000.00
8
Selling and administrative expenses
Â
275,000.00
9
Income from operations
Â
$220,000.00
Â
Saxon, Inc.
Variable…
The inventory ledger account of Yim Inc. shows that the level of inventory of the manufactured product has increased by 10,000 units over the period. Yim provided the following unit cost information for its manufacturing and non-manufacturing costs:
Cost Information
Costs
VariableÂ
Fixed
Manufacturing costs per unit
 12.50
 5.60
Selling and administrative costs per unit
 5.00
 2.00
Which of the following statements is true?
Group of answer choices
Net income will be the same under both variable and absorption costing.
Net income under absorption costing will be $76,000 more than under variable costing.
The difference in net income cannot be determined.
Net income under variable costing will be $56,000 less than net income under absorption costing.
The beginning inventory is 16,100 units. All of the units that were manufactured during the period and 16,100 units of the beginning inventory were sold. The beginning inventory fixed manufacturing costs are $41 per unit, and variable manufacturing costs are $96 per unit.
a.  Determine whether variable costing operating income is less than or greater than absorption costing operating income.Â
b. Â Determine the difference in variable costing and absorption costing operating income.
Chapter 7 Solutions
Managerial Accounting
Ch. 7 - What types of costs are customarily included in...Ch. 7 - Which type of manufacturing cost (direct...Ch. 7 - Which of the following costs would be included in...Ch. 7 - In the variable costing income statement, how are...Ch. 7 - Prob. 5DQCh. 7 - Prob. 6DQCh. 7 - Discuss how financial data prepared on the basis...Ch. 7 - Prob. 8DQCh. 7 - Explain why rewarding sales personnel on the basis...Ch. 7 - Explain why service companies use different...
Ch. 7 - Variable costing Marley Company has the following...Ch. 7 - Prob. 2BECh. 7 - Variable costingsales exceed production The...Ch. 7 - Prob. 4BECh. 7 - Contribution margin by segment The following...Ch. 7 - At the end of the first year of operations, 21,500...Ch. 7 - Gallatin County Motors Inc. assembles and sells...Ch. 7 - Fresno Industries Inc. manufactures and sells...Ch. 7 - On March 31, the end of the first month of...Ch. 7 - On April 30, the end of the first month of...Ch. 7 - On October 31, the end of the first month of...Ch. 7 - The following data were adapted from a recent...Ch. 7 - Estimated income statements, using absorption and...Ch. 7 - The following data were adapted from a recent...Ch. 7 - Prob. 10ECh. 7 - Explain why service companies use different...Ch. 7 - Galaxy Sports Inc. manufactures and sells two...Ch. 7 - Prob. 13ECh. 7 - Sales territory and salesperson profitability...Ch. 7 - Prob. 15ECh. 7 - Prob. 16ECh. 7 - Variable costing income statement for a service...Ch. 7 - Variable costing income statement for a service...Ch. 7 - Prob. 1PACh. 7 - The demand for solvent, one of numerous products...Ch. 7 - During the first month of operations ended May 31,...Ch. 7 - Salespersons report and analysis Walthman...Ch. 7 - Segment variable costing income statement and...Ch. 7 - Absorption and variable costing income statements...Ch. 7 - Income statements under absorption costing and...Ch. 7 - Absorption and variable costing income statements...Ch. 7 - Prob. 4PBCh. 7 - Variable costing income statement and effect on...Ch. 7 - Prob. 1MADCh. 7 - Prob. 2MADCh. 7 - Prob. 3MADCh. 7 - Segment disclosure by Apple Inc. (AAPL) provides...Ch. 7 - Prob. 1TIFCh. 7 - Inventory effects under absorption costing BendOR,...Ch. 7 - Communication Bon Jager Inc. manufactures and...Ch. 7 - Prob. 1CMACh. 7 - Chassen Company, a cracker and cookie...Ch. 7 - Prob. 3CMACh. 7 - Bethany Company has just completed the first month...
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