# Managerial accounting 1b ch19 | Accounting homework help

Managerial Accounting 1B

Financial and Managerial Accounting

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Chapter 19

1.

Exercise 19-1 Income reporting under absorption costing and variable costing L.O. P2

 Adams Company, a manufacturer of in-home decorative fountains, began operations on September 1 of the current year. Its cost and sales information for this year follows.

 Production costs Direct materials \$ 40 per unit Direct labor \$ 60 per unit Overhead costs for the year Variable overhead \$ 3,000,000 Fixed overhead \$ 7,000,000 Nonproduction costs for the year Variable selling and administrative \$ 770,000 Fixed selling and administrative \$ 4,250,000 Production and sales for the year Units produced 100,000 units Units sold 70,000 units Sales price per unit \$ 350 per unit

 1 Prepare an income statement for the company using absorption costing. (Input all amounts as positive values except net loss which should be indicated with a minus sign. Omit the “\$” sign in your response.)

 2 Prepare an income statement for the company using variable costing. (Input all amounts as positive values except net loss which should be indicated with a minus sign. Omit the “\$” sign in your response.)

 3 Under what circumstance(s) is reported income identical under both absorption costing and variable costing?

Exercise 19-4 Income reporting under absorption costing and variable costing L.O. P2

[The following information applies to the questions displayed below.]

 Woodson Company, a producer of solid oak tables, reports the following data from its current year operations, which is its second year of business.

 Sales price per unit \$ 320 per unit Units produced this year 115,000 units Units sold this year 118,000 units Units in beginning-year inventory 3,000 units Beginning inventory costs Variable (3,000 units × \$135) \$ 405,000 Fixed (3,000 units × \$80) 240,000 Total \$ 645,000 Production costs this year Direct materials \$ 40 per unit Direct labor \$ 62 per unit Overhead costs this year Variable overhead \$ 3,220,000 Fixed overhead \$ 7,400,000 Nonproduction costs this year Variable selling and administrative \$ 1,416,000 Fixed selling and administrative 4,600,000

2.Exercise 19-4 Part 1

 1 Prepare the current year income statement for the company using absorption costing. (Input all amounts as positive values except net loss which should be indicated with a minus sign. Leave no cells blank – be certain to enter “0” wherever required. Omit the “\$” sign in your response.)

3.Exercise 19-4 Part 2

 2 Prepare the current year income statement for the company using variable costing. (Input all amounts as positive values except net loss which should be indicated with a minus sign. Leave no cells blank – be certain to enter “0” wherever required. Omit the “\$” sign in your response.)

4.Exercise 19-6 Converting variable costing income to absorption costing income L.O. P2, P4

 Lyon Furnaces prepares the income statement under variable costing for its managerial reports, and it prepares the income statement under absorption costing for external reporting. For its first month of operations, 375 furnaces were produced and 225 were sold; this left 150 furnaces in ending inventory. The income statement information under variable costing follows.

 Sales (225 × \$1,600) \$ 360,000 Variable production cost (225 × \$625) 140,625 Variable selling and administrative expenses (225 × \$65) 14,625 Contribution margin 204,750 Fixed overhead cost 56,250 Fixed selling and administrative expense 75,000 Net income \$ 73,500

 1 Prepare this company’s income statement for its first month of operations under absorption costing.(Input all amounts as positive values except net loss which should be indicated with a minus sign. Omit the “\$” sign in your response.)

5.

Exercise 19-9 Contribution margin format income statement L.O. P3

 Polarix is a retailer of ATVs (all terrain vehicles) and accessories. An income statement for its Consumer ATV Department for the current year follows. ATVs sell, on average, for \$3,800. Variable selling expenses are \$270 each. The remaining selling expenses are fixed. Administrative expenses are 40% variable and 60% fixed. The company does not manufacture its own ATVs; it purchases them from a supplier for \$1,830 each.

 POLARIXIncome Statement—Consumer ATV DepartmentFor Year Ended December 21, 2011 Sales \$ 646,000 Cost of goods sold 311,100 Gross margin 334,900 Operating expenses Selling expenses \$ 135,000 Administrative expenses 59,500 194,500 Net income \$ 140,400

 1 Prepare an income statement for this current year using the contribution margin format. (Input all amounts as positive values except net loss which should be indicated with a minus sign. Omit the “\$” sign in your response.)

 2 For each ATV sold during this year, what is the contribution toward covering fixed expenses and that toward earning income? (Omit the “\$” sign in your response.)

 Contribution margin per ATV

6.

Exercise 19-11 Absorption costing and over-production L.O. C2

 Rourke Inc. reports the following annual cost data for its single product.

 Normal production and sales level 60,000 units Sales price \$ 56.00 per unit Direct materials \$ 9.00 Direct labor \$ 6.50 per unit Variable overhead \$ 11.00 per unit Fixed overhead \$ 720,000 in total

 If Rourke increases its production to 80,000 units, while sales remain at the current 60,000 unit level, by how much would the company’s gross margin increase or decrease under absorption costing? Assume the company has idle capacity to double current production. (Omit the “\$” sign in your response.)

7.Problem 19-1A Variable costing income statement and conversion to absorption costing income L.O. P2, P4

 Torres Company began operations this year. During this first year, the company produced 100,000 units and sold 80,000 units. The absorption costing income statement for its first year of operations follows.

 Sales (80,000 units × \$50 per unit) \$ 4,000,000 Cost of goods sold Beginning inventory \$ 0 Cost of goods manufactured (100,000 units × \$30 per unit) 3,000,000 Cost of good available for sale 3,000,000 Ending inventory (20,000 × \$30) 600,000 Cost of goods sold 2,400,000 Gross margin 1,600,000 Selling and administrative expenses 530,000 Net income \$ 1,070,000

 a. Selling and administrative expenses consist of \$350,000 in annual fixed expenses and \$2.25 per unit in variable selling and administrative expenses. b. The company’s product cost of \$30 per unit is computed as follows.

 Direct materials \$ 5 per unit Direct labor \$ 14 per unit Variable overhead \$ 2 per unit Fixed overhead (\$900,000 / 100,000 units) \$ 9 per unit

 1 Prepare an income statement for the company under variable costing. (Input all amounts as positive values except net loss which should be indicated with a minus sign. Omit the “\$” sign in your response.)

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