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 3E
Reconciliation of Absorption and Variable Costing Net Operating Incomes L07—3
Jorgansen Lighting; Inc., manufactures heavy-duty street lighting systems for municipalities. The company uses variable costing for internalmanagement reports and absorption costing for external reports to shareholders, creditors, and the government. The company has provided thefollowing data:
The company’s fixed manufacturing
Required:
1. Calculate each year’s absorption costing net operating income. Present your answer in the form of a reconciliation report.
2. Assume in Year 4 that the company’s variable costing net operating income was $984,400 and its absorption costing net operatingincome was $1,012,400.
a. Did inventories increase or decrease during Year 4?
b. How much fixed
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Reconciliation of Absorption and Variable Costing Net Operating Incomes
Jorgansen Lighting, Inc., manufactures heavy-duty street lighting systems for municipalities. The company uses variable costing for internal management reports and absorption costing for external reports to shareholders, creditors, and the government. The company has provided the following data:
The company’s fixed manufacturing overhead per unit was constant at $560 for all three years.
Required:
1. Calculate each year’s absorption costing net operating income. Present your answer in the form of a reconciliation report.
2. Assume in Year 4 that the company’s variable costing net operating income was $984,400 and its absorption costing net operating income was $1,012,400.
a. Did inventories increase or decrease during Year 4?
b. How much fixed manufacturing overhead cost was deferred or released from inventory during Year 4?
Required information
Use the following information for the Exercises below. (Algo)
[The following information applies to the questions displayed below.]
Hudson Company reports the following contribution margin income statement.
Sales (11,400 units at $225 each)
Variable costs (11,400 units at $180 each)
Contribution margin
Fixed costs
Income
HUDSON COMPANY
Contribution Margin Income Statement
For Year Ended December 31
1. Amount of sales
2. Margin of safety
Exercise 18-12 (Algo) Target income and margin of safety LO C2
1. Assume Hudson has a target income of $150,000. What amount of sales (in dollars) is needed to produce this target income?
2. If Hudson achieves its target income, what is its margin of safety (in percent)? (Round your answer to 1 decimal place.)
$ 2,565,000
2,052,000
513,000
360,000
$ 153,000
%
Required information
[The following information applies to the questions displayed below.]
Jorgansen Lighting, Incorporated, manufactures heavy-duty street lighting systems for municipalities. The company uses
variable costing for internal management reports and absorption costing for external reports. The company provided the
following data:
Year 1
Year 2
200
160
$ 290,000
Inventories
Beginning (units)
Ending (units)
Variable costing net operating income
The company's fixed manufacturing overhead per unit was constant at $560 for all three years.
Year 3
160
180
$ 269,000
180
220
$ 250,000
2. Assume in Year 4 the company's variable costing net operating income was $240,000 and its absorption costing net operating
income was $300,000.
a. Did inventories increase or decrease during Year 4?
b. How much fixed manufacturing overhead cost was deferred or released from inventory during Year 4?
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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