Use the following to answer questions 1 – 6
AR, Inc., manufactures and sells a single product. The following costs were incurred during the company’s first year of operations:
Sales price per unit
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$55
|
Variable costs per unit
| |
Direct material
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$21.00
|
Direct labor
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$12.00
|
Variable manufacturing overhead
|
$6.00
|
Variable selling and administrative
|
$5.00
|
Fixed costs
| |
Fixed manufacturing overhead
|
$200,000
|
Fixed selling and administrative
|
$80,000
|
During the year the company produced 50,000 units and sold 46,000 units.
1. $____________ What is the unit product cost under absorption costing?
2. $____________ What are the total period costs under absorption costing?
3. $____________ What is net operating income for the year under absorption costing?
4. $____________ What is the unit product cost under variable costing?
5. $____________ What is the contribution margin per unit?
6. $____________ What is net operating income for the year under variable costing?
Use the following to answer questions 7 – 12
Morey Company has just completed its second year of operations. The company’s accountant has prepared an absorption costing income statement for the year.
Morey Company
Income Statement
For the year ended December 31, 2011
| ||
Sales (45,000 units at $35 per unit)
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$1,575,000
| |
Cost of goods sold (45,000 units at $23.00 per unit
|
1,035,000
| |
Gross profit
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540,000
| |
Operating Expenses (selling and administrative expenses)
|
360,000
| |
Net operating income
|
180,000
|
The company’s selling and administrative expenses consist of $225,000 per year in fixed expenses and $3.00 per unit sold in variable expenses. The $23.00 per unit product cost given above is computed as follows:
Direct material
|
$11.00
|
Direct labor
|
$4.00
|
Variable manufacturing overhead
|
$2.00
|
Fixed manufacturing overhead ($300,000/50,000 units produced)
|
6.00
|
Unit product cost-absorption costing
|
$23.00
|
Prepare the contribution income statement with the available information.
7. $____________ Determine the unit contribution margin
8. $________ per unit What are the company’s unit product costs under variable costing?
9. ___________ UNITS How much did inventory change over the year (if decrease put “-“ in front of your answer).
10.$____________By how much will net operating income differ between variable costing and absorption costing?
11. Which method will show a higher net operating income amount (variable costing, absorption costing, or neither)?
A) variable costing
B) absorption costing
C) neither
B) absorption costing
C) neither
12. $__________ per unit. Determine Morey’s absorption unit product cost assuming they produced 40,000 units.
Use the following to answer questions 13 – 21
Q, Inc., makes a single product that sells for $75 per unit. Data for last year’s operations follow:
Units in Beginning Inventory
|
10,000
|
Units produced
|
100,000
|
Units sold
|
94,000
|
Units in Ending Inventory
|
16,000
|
Variable costs per unit
| |
Direct material
|
$32.00
|
Direct labor
|
18.00
|
Variable manufacturing overhead
|
6.00
|
Variable selling and administrative
|
4.00
|
Total variable costs per unit
|
$60.00
|
Fixed costs
| |
Fixed manufacturing overhead
|
$525,000
|
Fixed selling and administrative
|
190,000
|
Total fixed costs
|
$715,000
|
13. $____________What is the unit product cost under variable costing?
14. $____________What is the unit product cost under absorption costing?
15. $____________How much FMOH was expensed on the variable costing income statement?
16. $____________How much FMOH was expensed on the absorption costing income statement?
17. $____________By how much will net operating income differ between variable costing and absorption costing?
18. $_______________Based on the above information, what is net operating income if absorption costing is used?
For 19 - 21 Assume the company produced 87,500 units this period.
19. $______________ How much FMOH would be expensed on the variable costing income statement?
20. $______________ How much FMOH would be expensed on the absorption costing income statement?
21. $_______________Based on the change in production what is the absorption costing net operating income?
Use the following to answer questions 22 – 28
Z Company, which has only one product, has provided the following data concerning its most recent month of operations:
Selling price..............................................................
|
$90.00
|
Units in beginning inventory..................................
|
2,000
|
Units produced.........................................................
|
25,000
|
Units sold...................................................................
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26,200
|
Units in ending inventory.......................................
|
800
|
Variable costs per unit:
| |
Direct materials....................................................
|
$22.00
|
Direct labor...........................................................
|
$18.00
|
Variable manufacturing overhead....................
|
$8.00
|
Variable selling and administrative...................
|
$4.00
|
Fixed costs:
| |
Fixed manufacturing overhead.........................
|
$650,000
|
Fixed selling and administrative........................
|
$310,500
|
22. $_____ What is the unit product cost for the month under variable costing?
23. $______ What is the contribution margin for the month under the variable costing approach?
24. $ What is the net operating income for the month under variable costing?
25. $____ What is the unit product cost for the month under absorption costing?
26. $______ What is the gross profit for the month under the absorption costing approach?
27. $______ What is the net operating income for the month under absorption costing?
28. $_____ How much fixed manufacturing overhead was expensed on the absorption costing income statement?
Use the following to answer questions 29 - 31
Tech, Inc. produces and sells two products. Revenue and cost information relating to the products follow:
Product
| ||
AB-1
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ZY-2
| |
Selling price per pack
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$18.00
|
$35.00
|
Variable expenses per pack
|
$10.00
|
$22.00
|
Traceable fixed expenses for the year
|
$165,000
|
$144,000
|
Common fixed expenses in the company total $230,000 annually. Last year the company produced and sold 40,000 AB-1 and31,500 ZY-2.
29. $________________ Determine the product line segment margin for AB-1
30. $________________ Determine the product line segment margin for ZY-2
31. $________________ Determine the company’s net operating income.
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