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 23E
Pandora Pillow Company’s planned production for the year just ended was 10,000 units. This production level was achieved, but only 9,000 units were sold. Other data follow:
The cost per unit remained the same in the current year as in the previous year. There were no work-in-process inventories at the beginning or end of the year.
Required:
- 1. What would be Pandora Pillow Company’s finished-goods inventory cost on December 31 under the variable-costing method?
- 2. Which costing method, absorption or variable costing, would show a higher operating income for the year? By what amount?
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Mobile, Inc. manufactured 700 units of a new product A during the year. The variable cost of product A was $ 5.00 and the fixed cost per unit $ 2.00. The inventory at the end of the year, on December 31, was 100 units. There was no inventory of the product at the beginning of the year. What would be the change in inventory in dollars as of December 31 if we used the variable cost system instead of the absorption cost system?
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During the last year, 25,000 units were produced and 22,000 units were sold. The Finished Goodsinventory account at the end of the year shows a balance of $72,000 for the 3,000 unsold units.Required:1. Is the company using absorption costing or variable costing to cost units in the Finished Goods inventory account? Show computations to support your answer.2. Assume that the company wishes to prepare financial statements for the year to issue to its stockholders.a. Is the $72,000 figure for Finished Goods inventory the correct amount to use on these statements for external reporting purposes? Explain.b. At what dollar amount should the 3,000 units be carried in the inventory for externalreporting purposes?
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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