Managerial Accounting: Creating Value in a Dynamic Business Environment
12th Edition
ISBN: 9781260417074
Author: HILTON, Ronald
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 8, Problem 20E
Manta Ray Company manufactures diving masks with a variable cost of $25. The masks sell for $34. Budgeted fixed manufacturing
Required: Under each of the following conditions, state (a) whether operating income is higher under variable or absorption costing and (b) the amount of the difference in reported operating income under the two methods. Treat each condition as an independent case.
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Manta Ray Company manufactures diving masks with a variable cost of $28. The masks sell for $37. Budgeted fixed manufacturing
overhead for the most recent year was $841,500. Actual production was equal to planned production.
Required:
State whether operating income is higher under variable or absorption costing and the amount of the difference in reported operating
income under the two methods. Treat each condition as an independent case. (Do not round intermediate calculations.)
1. Production
Sales
2. Production
Sales
3. Production
Sales
112,200 units
109,300 units
99,000 units
104,900 units
80,600 units
80,600 units
Income Higher Under
(Method)
1. Absorption costing
2. Variable costing
Amount of
Difference
3. Same under both
2$
Pavilion Company is using the high-low method to determine the fixed and variable components of its utilities expense, a semivariable cost. Pavilion Company believes direct labor hours is the best activity to measure the cost. In its low month, there were 1,600 direct labor hours and utilities expense was $8,000. In its high month, there were 3,600 direct labor hours and utilities expense was $12,000. Using the high-low method, what is the variable cost per direct labor hour, rounded to the nearest cent?
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Manta Ray Company manufactures diving masks with a variable cost of $25. The masks sell for $34. Budgeted fixed manufacturing overhead for the most recent year was $792,000. Actual production was equal to planned production.Required: Under each of the following conditions, state (a) whether operating income is higher under variable or absorption costing and (b) the amount of the difference in reported operating income under the two methods. Treat each condition as an independent case.
1. Production ............................................... 110,000 unitsSales ........................................................ 108,000 units2. Production ............................................... 90,000 unitsSales ........................................................ 95,000 units3. Production ............................................... 79,200 unitsSales ........................................................ 79,200 units
Chapter 8 Solutions
Managerial Accounting: Creating Value in a Dynamic Business Environment
Ch. 8 - Briefly explain the difference between absorption...Ch. 8 - Timing is the key in distinguishing between...Ch. 8 - The term direct costing is a misnomer. Variable...Ch. 8 - When inventory increases, will absorption-costing...Ch. 8 - Why do many managers prefer variable costing over...Ch. 8 - Explain why some management accountants believe...Ch. 8 - Prob. 7RQCh. 8 - Why do proponents of absorption costing argue that...Ch. 8 - Why do proponents of variable costing prefer...Ch. 8 - Which is more consistent with cost-volume-profit...
Ch. 8 - Explain how the accounting definition of an asset...Ch. 8 - List and define four types of product quality...Ch. 8 - Explain the difference between observable and...Ch. 8 - Prob. 14RQCh. 8 - What is meant by a products grade, as a...Ch. 8 - Prob. 16RQCh. 8 - Prob. 17RQCh. 8 - Explain three strategies of environmental cost...Ch. 8 - Prob. 19RQCh. 8 - Manta Ray Company manufactures diving masks with a...Ch. 8 - Information taken from Tuscarora Paper Companys...Ch. 8 - Easton Pump Companys planned production for the...Ch. 8 - Pandora Pillow Companys planned production for the...Ch. 8 - Bianca Bicycle Company manufactures mountain bikes...Ch. 8 - Refer to the data given in the preceding exercise...Ch. 8 - Prob. 26ECh. 8 - Prob. 27ECh. 8 - The following costs were incurred by Osaka Metals...Ch. 8 - San Mateo Circuitry manufactures electrical...Ch. 8 - Prob. 31ECh. 8 - Skinny Dippers, Inc. produces nonfat frozen...Ch. 8 - Yellowstone Company began operations on January 1...Ch. 8 - Outback Corporation manufactures tactical LED...Ch. 8 - Great Outdoze Company manufactures sleeping bags,...Ch. 8 - Dayton Lighting Company had operating income for...Ch. 8 - Prob. 37PCh. 8 - Chataqua Can Company manufactures metal cans used...Ch. 8 - Advanced Technologies (AT) produces two...Ch. 8 - Laser News Technology, Inc. manufactures...Ch. 8 - Prob. 42CCh. 8 - Refer to the information given in the preceding...Ch. 8 - Prob. 44C
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What is variance analysis?; Author: Corporate finance institute;https://www.youtube.com/watch?v=SMTa1lZu7Qw;License: Standard YouTube License, CC-BY