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 26E
1.
To determine
Calculate the inventoriable cost of Company A under absorption costing method.
2.
To determine
Calculate the inventoriable cost of Company A under variable costing method.
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1. If the manufacturer uses variable costing, the inventoriable costs for the fiscal year are
2. Using absorption (full) costing inventoriable costs are
Using absorption costing:(i) Calculate the production cost per unit. (ii) Prepare an income statement for the year.
Great Outdoze Company manufactures sleeping bags, which sell for $66.10 each. The variable costs of production are as follows:
Direct material
Direct labor
Variable manufacturing overhead
$19.10
10.30
7.40
k
Budgeted fixed overhead in 20x1 was $157,500 and budgeted production was 25,000 sleeping bags. The year's actual production
was 25,000 units, of which 21,300 were sold. Variable selling and administrative costs were $1.30 per unit sold; fixed selling and
administrative costs were $22,000.
at
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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- Summarized data for Walrus Co. for its first year of operations are: A. Prepare an income statement under absorption costing B. Prepare an income statement under variable costingarrow_forwardUsing the data in P4-2 and Microsoft Excel: 1. Separate the variable and fixed elements. 2. Determine the cost to be charged to the product for the year. 3. Determine the cost to be charged to factory overhead for the year. 4. Determine the plotted data points using Chart Wizard. 5. Determine R2. 6. How do these solutions compare to the solutions in P4-2 and P4-3? 7. What does R2 tell you about this cost model?arrow_forwardVariable-Costing Income Statement Refer to the data for Osterman Company on the previous page. Required: 1. Calculate the cost of goods sold under variable costing. 2. Prepare an income statement using variable costing. Use the following information for Brief Exercises 3-23 and 3-24: During the most recent year, Osterman Company had the following data:arrow_forward
- Cicleta Manufacturing has four activities: receiving materials, assembly, expediting products, and storing goods. Receiving and assembly are necessary activities; expediting and storing goods are unnecessary. The following data pertain to the four activities for the year ending 20x1 (actual price per unit of the activity driver is assumed to be equal to the standard price): Required: 1. Prepare a cost report for the year ending 20x1 that shows value-added costs, non-value-added costs, and total costs for each activity. 2. Explain why expediting products and storing goods are non-value-added activities. 3. What if receiving cost is a step-fixed cost with each step being 1,500 orders whereas assembly cost is a variable cost? What is the implication for reducing the cost of waste for each activity?arrow_forward1. Prepare the current-year income statement for the company using variable costing. 2. Prepare the current-year income statement for the company using absorption costing.arrow_forward1. Compute the unit product cost in each year under variable costing. 2. Compute for the net operating income under variable costing for year 1 3. Compute for the net operating income under variable costing for year 2arrow_forward
- Required: 1. Assume that the company uses absorption costing. a. Calculate the unit product cost. b. Prepare an income statement for May. 2. Assume that the company uses variable costing. a. Calculate the unit product cost. b. Prepare a contribution format income statement for May.arrow_forward1. Assume that the company uses absorption costing. a. Determine the unit product cost. b. Prepare an income statement for May. 2. Assume that the company uses variable costing. a. Determine the unit product cost. b. Prepare a contribution format income statement for May.arrow_forwardDuring Heaton Company's first two years of operations, It reported absorption costing net operating income as follows: Year 1 Year 2 $ Sales (@ $61 per unit) 1,159,000 1,769,000 Cost of goods sold (@ $37 per 703,000 1,073,000 unit) Gross margin Selling and administrative expenses* Net operating income *$3 per unit variable: $245,000 fixed each year. The company's $37 unit product cost is computed as follows: Direct materials Direct labor 456,000 696,000 302,000 332,000 $ 154,000 $364,000 Units produced Units sold Variable manufacturing overhead Fixed manufacturing overhead ($456,000+ 24,000 units). Absorption costing unit product cost Production and cost data for the first two years of operations are: Year 1 Year 2 24,000 24,000 19,000 29,000 $7 10 1 19 $37 Required: 1. Using variable costing, what is the unit product cost for both years? 2. What is the variable costing net operating income in Year 1 and in Year 2? 3. Reconcile the absorption costing and the variable costing net…arrow_forward
- a) Compute the predetermined overhead rate under the current method of allocation and determine the unit product cost of each product for the current year b) The company's overhead costs can be attributed to four major activities. These activities and the amount of overhead cost attributable to each for the current year are given below. Using the data below and an activity-based costing approach, determine the unit product cost of each product for the current year. Expected Activity Activity Cost Estimated Product B Product H Total Pools Overhead Costs Machine setups required Purchase orders issued $180,000 600 1,200 1,800 38,382 500 100 600 Machine- 92,650 6,800 10,200 17,000 hours required Maintenance 138.968 693 907 1,600 requests ued $450,000arrow_forwardThe following statements have been made about life cycle costing: (i) It focuses on the short-term costs at the beginning of a product’s life cycle (ii) It identifies all costs which arise in relation to the product annually to calculate the product’s annual profit. (iii) It accumulates a product’s costs over its whole life time and works out the overall profitability of a product (iv) It allocates costs to each stage of a product’s life cycle and writes them off at the end of each stage Which of the above statements is/are correct? a. (iii) only b. (i) and (iii) c. (i) and (iv) d. (ii) onlyarrow_forwardCheck my work During Heaton Company's first two years of operations, It reported absorption costing net operating income as follows: Sales (@ $63 per unit) Cost of goods sold (@ $35 per unit) Gross margin Selling and administrative expenses* Year 1 $ 1, 008, 00 560, 000 448, 000 295, 000 Year 2 $ 1, 638, 00 910, 000 728, 000 325, 000 Net operating income 153, 000 403, 000 * $3 per unit variable; $247,000 fixed each year. The company's $35 unit product cost is computed as follows: Direct materials $ 5 Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($357, 000 + 21, 000 units) Absorption costing unit productlcost 10 3 17 $ 35 Production and cost data for the first two years of operations are: Year 2 21, 000 Year 1 Units produced Units sold 21, 000 16, 000 26, 000 Required: 1. Using variable costing, what is the unit product cost for both years? 2. What is the variable costing net operating income in Year 1 and in Year 2? 3. Reconcile the absorption costing and…arrow_forward
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