Question
In: Accounting
Problem 7-23 Absorption and Variable Costing; Production Constant, Sales Fluctuate [LO7-1, LO7-2, LO7-3] Tami Tyler opened...
Problem 7-23 Absorption and Variable Costing; Production Constant, Sales Fluctuate [LO7-1, LO7-2, LO7-3]
Tami Tyler opened Tami’s Creations, Inc., a small manufacturing company, at the beginning of the year. Getting the company through its first quarter of operations placed a considerable strain on Ms. Tyler’s personal finances. The following income statement for the first quarter was prepared by a friend who has just completed a course in managerial accounting at State University.
|
Tami’s Creations, Inc. Income Statement For the Quarter Ended March 31 |
||||||
| Sales (28,350 units) | $ | 1,134,000 | ||||
| Variable expenses: | ||||||
| Variable cost of goods sold | $ | 470,610 | ||||
| Variable selling and administrative | 195,615 | 666,225 | ||||
| Contribution margin | 467,775 | |||||
| Fixed expenses: | ||||||
| Fixed manufacturing overhead | 266,800 | |||||
| Fixed selling and administrative | 220,975 | 487,775 | ||||
| Net operating loss | $ | ( 20,000) | ||||
Ms. Tyler is discouraged over the loss shown for the quarter, particularly because she had planned to use the statement as support for a bank loan. Another friend, a CPA, insists that the company should be using absorption costing rather than variable costing and argues that if absorption costing had been used the company probably would have reported at least some profit for the quarter.
At this point, Ms. Tyler is manufacturing only one product—a swimsuit. Production and cost data relating to the swimsuit for the first quarter follow:
| Units produced | 33,350 | |||
| Units sold | 28,350 | |||
| Variable costs per unit: | ||||
| Direct materials | $ | 7.10 | ||
| Direct labor | $ | 7.70 | ||
| Variable manufacturing overhead | $ | 1.80 | ||
| Variable selling and administrative | $ | 6.90 | ||
Required:
1. Complete the following:
a. Compute the unit product cost under absorption costing.
b. What is the company’s absorption costing net operating income (loss) for the quarter?
c. Reconcile the variable and absorption costing net operating income (loss) figures.
3. During the second quarter of operations, the company again produced 33,350 units but sold 38,350 units. (Assume no change in total fixed costs.)
a. What is the company’s variable costing net operating income (loss) for the second quarter?
b. What is the company’s absorption costing net operating income (loss) for the second quarter?
c. Reconcile the variable costing and absorption costing net operating incomes for the second quarter.
Solutions
ekkarill92 answered 2 years agoRelated Solutions
Problem 7-23 Absorption and Variable Costing; Production Constant, Sales Fluctuate [LO7-1, LO7-2, LO7-3] Tami Tyler opened...
Problem 7-23 Absorption and Variable Costing; Production
Constant, Sales Fluctuate [LO7-1, LO7-2, LO7-3]
Tami Tyler opened Tami’s Creations, Inc., a small manufacturing
company, at the beginning of the year. Getting the company through
its first quarter of operations placed a considerable strain on Ms.
Tyler’s personal finances. The following income statement for the
first quarter was prepared by a friend who has just completed a
course in managerial accounting at State University.
Tami’s Creations, Inc.
Income Statement
For the Quarter...
Problem 6-23 Absorption and Variable Costing; Production Constant, Sales Fluctuate [LO6-1, LO6-2, LO6-3] Tami Tyler opened...
Problem 6-23 Absorption and Variable Costing; Production
Constant, Sales Fluctuate [LO6-1, LO6-2, LO6-3]
Tami Tyler opened Tami’s Creations, Inc., a small manufacturing
company, at the beginning of the year. Getting the company through
its first quarter of operations placed a considerable strain on Ms.
Tyler’s personal finances. The following income statement for the
first quarter was prepared by a friend who has just completed a
course in managerial accounting at State University.
Tami’s Creations, Inc.
Income Statement
For the Quarter...
Problem 6-23A Absorption and Variable Costing; Production Constant, Sales Fluctuate [LO6-1, LO6-2, LO6-3] Tami Tyler opened...
Problem 6-23A Absorption and Variable Costing; Production
Constant, Sales Fluctuate [LO6-1, LO6-2, LO6-3]
Tami Tyler opened Tami’s Creations, Inc., a small manufacturing
company, at the beginning of the year. Getting the company through
its first quarter of operations placed a considerable strain on Ms.
Tyler’s personal finances. The following income statement for the
first quarter was prepared by a friend who has just completed a
course in managerial accounting at State University.
Tami’s Creations, Inc.
Income Statement
For the...
Exercise 7-9 Variable and Absorption Costing Unit Product Costs and Income Statements [LO7-1, LO7-2, LO7-3] Walsh...
Exercise 7-9 Variable and Absorption Costing Unit Product Costs
and Income Statements [LO7-1, LO7-2, LO7-3]
Walsh Company manufactures and sells one product. The following
information pertains to each of the company’s first two years of
operations:
Variable costs per unit:
Manufacturing:
Direct materials
$
24
Direct labor
$
11
Variable manufacturing overhead
$
3
Variable selling and administrative
$
2
Fixed costs per year:
Fixed manufacturing overhead
$
320,000
Fixed selling and administrative expenses
$
50,000
During its first year...
Exercise 7-9 Variable and Absorption Costing Unit Product Costs and Income Statements [LO7-1, LO7-2, LO7-3] Walsh...
Exercise 7-9 Variable and Absorption Costing Unit Product Costs
and Income Statements [LO7-1, LO7-2, LO7-3]
Walsh Company manufactures and sells one product. The following
information pertains to each of the company’s first two years of
operations:
Variable costs per unit:
Manufacturing:
Direct materials
$
28
Direct labor
$
13
Variable manufacturing
overhead
$
3
Variable selling and
administrative
$
2
Fixed costs per year:
Fixed manufacturing
overhead
$
320,000
Fixed selling and administrative
expenses
$
100,000
During its first year...
Exercise 7-9 Variable and Absorption Costing Unit Product Costs and Income Statements [LO7-1, LO7-2, LO7-3] Walsh...
Exercise 7-9 Variable and Absorption Costing Unit Product Costs
and Income Statements [LO7-1, LO7-2, LO7-3]
Walsh Company manufactures and sells one product. The following
information pertains to each of the company’s first two years of
operations:
Variable costs per unit:
Manufacturing:
Direct materials
$
25
Direct labor
$
15
Variable manufacturing overhead
$
5
Variable selling and administrative
$
4
Fixed costs per year:
Fixed manufacturing overhead
$
400,000
Fixed selling and administrative expenses
$
70,000
During its first year...
Problem 7-18 Variable and Absorption Costing Unit Product Costs and Income Statements [LO7-1, LO7-2] Haas Company...
Problem 7-18 Variable and Absorption Costing Unit Product Costs
and Income Statements [LO7-1, LO7-2]
Haas Company manufactures and sells one product. The following
information pertains to each of the company’s first three years of
operations:
Variable costs per unit:
Manufacturing:
Direct materials
$
26
Direct labor
$
18
Variable manufacturing
overhead
$
9
Variable selling and
administrative
$
1
Fixed costs per year:
Fixed manufacturing
overhead
$
540,000
Fixed selling and administrative
expenses
$
120,000
During its first year of...
Problem 7-18 Variable and Absorption Costing Unit Product Costs and Income Statements [LO7-1, LO7-2] Haas Company...
Problem 7-18 Variable and Absorption Costing Unit Product Costs
and Income Statements [LO7-1, LO7-2]
Haas Company manufactures and sells one product. The following
information pertains to each of the company’s first three years of
operations:
Variable costs per unit:
Manufacturing:
Direct materials
$
29
Direct labor
$
21
Variable manufacturing overhead
$
5
Variable selling and administrative
$
1
Fixed costs per year:
Fixed manufacturing overhead
$
330,000
Fixed selling and administrative expenses
$
150,000
During its first year of...
Problem 7-18 Variable and Absorption Costing Unit Product Costs and Income Statements [LO7-1, LO7-2] Haas Company...
Problem 7-18 Variable and Absorption Costing Unit Product Costs
and Income Statements [LO7-1, LO7-2]
Haas Company manufactures and sells one product. The following
information pertains to each of the company’s first three years of
operations:
Variable costs per unit:
Manufacturing:
Direct materials
$
29
Direct labor
$
21
Variable manufacturing overhead
$
9
Variable selling and administrative
$
3
Fixed costs per year:
Fixed manufacturing overhead
$
420,000
Fixed selling and administrative expenses
$
180,000
During its first year of...
Problem 7-22 Variable Costing Income Statements; Income Reconciliation [LO7-1, LO7-2, LO7-3] Denton Company manufactures and sells...
Problem 7-22 Variable Costing Income Statements; Income
Reconciliation [LO7-1, LO7-2, LO7-3]
Denton Company manufactures and sells a single product. Cost
data for the product are given:
Variable costs per unit:
Direct materials
$
5
Direct labor
11
Variable manufacturing overhead
2
Variable selling and administrative
2
Total variable cost per unit
$
20
Fixed costs per month:
Fixed manufacturing overhead
$
90,000
Fixed selling and administrative
160,000
Total fixed cost per month
$
250,000
The product sells for $47 per...
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