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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Textbook Question
Chapter 8, Problem 38P
Chataqua Can Company manufactures metal cans used in the food-processing industry. A case of cans sells for $50. The variable costs of production for one case of cans are as follows:
Variable selling and administrative costs amount to $1 per case. Budgeted fixed manufacturing
Actual costs were the same as the budgeted costs.
Required:
- 1. Prepare operating income statements for Chataqua Can Company for its first three years of operations using:
- a. Absorption costing.
- b. Variable costing.
- 2. Reconcile Chataqua Can Company’s operating income reported under absorption and variable costing for each of its first three years of operation. Use the shortcut method.
- 3. Suppose that during Chataqua’s fourth year of operation actual production equals planned production, actual costs are as expected, and the company ends the year with no inventory on hand.
- a. What will be the difference between absorption-costing income and variable-costing income in year 4?
- b. What will be the relationship between total operating income for the four-year period as reported under absorption and variable costing? Explain.
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Paney Company makes and sells calendars. The information on the cost per unit is as follows:
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GOLD Company has a single product called a Goof. The company normally produces and sells 60,000 Goofs each year at a selling price of $33 per unit. The company’s unit costs at this level of activity are:
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Assume that GOLD Company has sufficient capacity to produce 90,000 Goofs every year without any increase in fixed manufacturing overhead costs. The company could increase its sales by 20% above the present 60,000 units each year if it were willing to increase the fixed selling expenses by $82,000. Would the increased fixed expenses be justified? Show your calculations.
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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