Question

In: Accounting

The level of inventory of a manufactured product has increased by 8,260 units during a period....

The level of inventory of a manufactured product has increased by 8,260 units during a period. The following data are also available:

	Variable	Fixed
Unit manufacturing costs of the period	$14	$6
Unit operating expenses of the period	$3	$5

What would be the effect on income from operations if variable costing is used rather than absorption costing?

a.$49,560 increase

b.$90,860 increase

c.$49,560 decrease

d.$90,860 decrease

A business operated at 100% of capacity during its first month and incurred the following costs:

Production costs (18,200 units):
Direct materials	$172,900
Direct labor	221,900
Variable factory overhead	262,000
Fixed factory overhead	98,600	$755,400

Operating expenses:
Variable operating expenses	$123,000
Fixed operating expenses	41,900	164,900

If 2,000 units remain unsold at the end of the month, what is the amount of inventory that would be reported on the absorption costing balance sheet?

a.$101,132

b.$83,020

c.$85,692

d.$72,176

A business operated at 100% of capacity during its first month, with the following results:

Sales (96 units)		$480,000
Production costs (120 units):
Direct materials	$60,000
Direct labor	15,000
Variable factory overhead	27,000
Fixed factory overhead	24,000	126,000

Operating expenses:
Variable operating expenses	$5,890
Fixed operating expenses	3,070	8,960

What is the amount of the contribution margin that would be reported on the variable costing income statement?

a.$471,040

b.$389,440

c.$479,880

d.$392,510

Expert Solution

1.

Effect on income from operations if absorption costing is used rather than variable costing = 8260 * (14-3) = $90,860

b.$90,860 increase

2. b.$83,020

If 2,000 units remain unsold at the end of the month, the amount of inventory that would be reported on the absorption costing balance sheet = 2000*41.51 = $83,020

Explanation:-

Unit product cost under Absorption costing:-Direct materials + Direct Labor+ Variable manufacturing overhead + fixed manufacturing overhead

=($172,900+$221,900+$262,000+$98,600)/18200 units

= $41.51 per unit

3. d.$392,510

The amount of the contribution margin that would be reported on the variable costing income statement

Income statement (Using Variable costing approach)
Particulars		Amount
		$
Sales		480,000

Less:- Variable Manufacturing Costs:
Direct materials (60,000 / 120 *96)	48,000
Direct labor (15,000 / 120 *96)	12,000
Variable factory overhead (27,000 / 120 *96)	21,600	81,600
Gross Contribution Margin		398,400
Less: Variable Operating Expenses		5,890
Contribution Margin		392,510

Please give me a Thumbs up ?.Thanks!!

ekkarill92 answered 2 years ago

The beginning inventory is 8,000 units. All of the units that were manufactured during the period...

The beginning inventory is 8,000 units. All of the units that were manufactured during the period and 8,000 units of the beginning inventory were sold. The beginning inventory fixed manufacturing costs are $35 per unit, and variable manufacturing costs are $79 per unit. a. Determine whether variable costing operating income is less than or greater than absorption costing operating income. b. Determine the difference in variable costing and absorption costing operating income. $

Units of a manufactured product that are to be inspected are known to be subject to...

Units of a manufactured product that are to be inspected are known to be subject to three types of defects. Six percent of the units have surface finish flaws, 4% have improperly fixed ground wires, and 3% have base mounts that are not level. It is known that .25% of the units have all three defect types and .50% have surface finish flaws and improperly fixed ground wires. In addition, we know that .50% have the combination of only surface...

Brassard Company manufactured 1,500 units of its only product during 2019. The inputs for this production...

Brassard Company manufactured 1,500 units of its only product during 2019. The inputs for this production are as follows: 450 pounds of Raw Material G at $1.50 per pound 300 pounds of Raw Material H at cost of $2,75 per pound 300 direct labor hours at $20 per hour The firm manufactured 1,800 units of the same product in 2017 with the following inputs: 500 pounds of Raw Material G at a cost of $1,20 per pound 360 pounds of...

Glasgow Enterprises started the period with 60 units in beginning inventory that cost $1.70 each. During...

Glasgow Enterprises started the period with 60 units in beginning inventory that cost $1.70 each. During the period, the company purchased inventory items as follows. Glasgow sold 255 units after purchase 3 for $10.00 each. Purchase No. of Items Cost 1 380 $ 2.20 2 110 $ 2.30 3 50 $ 2.70 Glasgow's ending inventory under LIFO would be: Multiple Choice $729. $932. $794. $587.

A firm has 200 units of a product in inventory. The forecasts of the demands are...

A firm has 200 units of a product in inventory. The forecasts of the demands are 40 units per week. An MPS quantity of 50 units is planned to arrive in period 2. Customer orders are 40 for period 1, 10 for period 2, and 50 for period 3. Present the computation to estimate the projected on-hand inventory at the end of period 3, and the result (for example, 500-400+10=110 units.)

1. If total liabilities increased by $100,000 and stockholders’ equity increased by $30,000 during a period...

1. If total liabilities increased by $100,000 and stockholders’ equity increased by $30,000 during a period of time, then total assets must change by what amount and direction during that same period? Question 1 options: $100,000 increase $130,000 decrease $30,000 decrease $130,000 increase 2. Meat and Liquor Corp. has five plants nationwide that cost $400 million to build. The current fair market value of the plants is $550 million. The plants are listed for sale at $600 million. The plants...

Cobe Company has already manufactured 21,000 units of Product A at a cost of $30 per...

Cobe Company has already manufactured 21,000 units of Product A at a cost of $30 per unit. The 21,000 units can be sold at this stage for $480,000. Alternatively, the units can be further processed at a $260,000 total additional cost and be converted into 5,700 units of Product B and 11,900 units of Product C. Per unit selling price for Product B is $101 and for Product C is $56. 1. Prepare an analysis that shows whether the 21,000...

Cobe Company has already manufactured 18,000 units of Product A at a cost of $20 per...

Cobe Company has already manufactured 18,000 units of Product A at a cost of $20 per unit. The 18,000 units can be sold at this stage for $410,000. Alternatively, the units can be further processed at a $290,000 total additional cost and be converted into 5,800 units of Product B and 11,100 units of Product C. Per unit selling price for Product B is $104 and for Product C is $55. 1. Prepare an analysis that shows whether the 18,000...

During the current period, McLaughlin Company sold 60,000 units of product at $30 per unit. At...

During the current period, McLaughlin Company sold 60,000 units of product at $30 per unit. At the beginning of the period, there were 10,000 units in inventory and McLaughlin Company manufactured 50,000 units during the period. The manufacturing costs and selling and administrative expenses were as follows: Total Cost Number of Units Unit Cost Beginning inventory: Direct materials.....................................$ 67,000 10,000 $ 6.70 Direct labor........................................ 155,000 10,000 15.50 Variable factory overhead...........................18,000 10,000 1.80 Fixed factory overhead............................. 20,000 10,000 2.00 Total ....

during january, tedesco company sold 183 units of product k. It's beginning inventory and purchases during...

during january, tedesco company sold 183 units of product k. It's beginning inventory and purchases during the month were as following: january. 1- beginng inventory 100 units @ $41, january 5 -purchases 100 units @ $43, january 10 -purchases 100 units @ $38, january 15- purchases 100 units @ $50, january 20- purchases 100 units @ $48. Using the periodic inventory system compute the ending inventory and the cost of goods sold using the methods: a) average cost, b) FIFO,...