2 3 Data 4 Selling price per unit 5 Manufacturing costs 6 Variable per unit produced 7 Direct materials 8 Direct labor 9 Variable manufacturing overhead 10 Fixed manufacturing overhead per year 11 Selling and administrative expenses Variable per unit sold $50 $11 $6 $3 $120,000 $70,000 38 54 12 13 Fixed per year 14 15 Year 1 Year 2 16 Units in beginning inventory 0 17 Units produced during the year 10,000 6,000 18 Units sold during the year 8,000 8,000 19 20 Entor a formula into each of the calls marked with a 7 below 21 Review Problem 1: Contrasting Variable and Absorption Costing 22 23 Compute the Ending Inventory 24 25 Units in beginning inventory 26 Units produced during the year 27 Units sold during the year 28 Units in ending inventory 29 30 Compute the Absorption Costing Unit Product Cost 31 32 Direct materials 33 Direct labor 34 Variable manufacturing overhead 35 Fixed manufacturing overhead 36 Absorption costing unit product cost 37 38 Construct the Absorption Costing Income Statement 39 40 Sales 41 Cost of goods sold 42 Gross margin 43 Selling and administrative expenses 44 Net operating income 45 46 Compute the Variable Costing Unit Product Cost Year 1 Year 2 0 2 7 ? 7 7 7 Year 1 Year 2 2 ? 7 7 ? ? 2 ? 2 Year 1 Year 2 2 2 2 9 " 7 7 ? 9 47 48 Direct materials 49 Direct labor 50 Variable manufacturing overhead Year 1 Year 2 ? 2 " 2 2 59 Contribution margin 60 Fixed expenses 51 Variable costing unit product cost 52 53 Construct the Variable Costing Income Statement 54 55 Sales 56 Variable expenses 57 Variable cost of goods sold 58 Variable selling and administrative expenses 61 Fixed manufacturing overhead Your 1 Year 2 7 7 2 2 7 7 ? ? ? 7 62 Fixed selling and administrative expenses 2 2 9 9 63 Net operating income 7 64 65 66 44 Chapter 6 Form + Required information The Chapter 6 Form worksheet is to be used to create your own worksheet version of the Review Problem in the text. 2. Change all of the numbers in the data area of your worksheet so that it looks like this: A B C 1 Chapter 6: Applying Excel 2 3 Data 4 Selling price per unit $ 350 5 Manufacturing costs: 6 Variable per unit produced 7 Direct materials $ 131 T 8 Direct labor $ 63 9 Variable manufacturing overhead $ 20 10 Fixed manufacturing overhead per year $ 150,800 11 Selling and administrative expenses: 12 Variable per unit sold $ 8 13 Fixed per year $ 79,000 14 15 16 Units in beginning inventory 17 Units produced during the year 18 Units sold during the year Year 1 Year 2 0 2,900 2,600 2,700 2,700 If your formulas are correct, you should get the correct answers to the following questions. (a) What is the net operating income (loss) in Year 1 under absorption costing? (b) What is the net operating income (loss) in Year 2 under absorption costing? (c) What is the net operating income (loss) in Year 1 under variable costing? (d) What is the net operating income (loss) in Year 2 under variable costing? (e) The net operating income (loss) under absorption costing is less than the net operating income (loss) under variable costing in Year 2 because: (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.) Units were left over from the previous year. The cost of goods sold is always less under variable costing than under absorption costing. Sales exceeded production so some of the fixed manufacturing overhead of the period was released from inventories under absorption costing 3. Make a note of the absorption costing net operating income (loss) in Year 2. At the end of Year 1, the company's board of directors set a target for Year 2 of net operating income of $180,000 under absorption costing. If this target is met, a hefty bonus would be paid to the CEO of the company. Keeping everything else the same from part (2) above, change the units produced in Year 2 to 5,200 units. (a) Would this change result in a bonus being paid to the CEO? O Yes No (b) What is the net operating income (loss) in Year 2 under absorption costing? (c) Would this doubling of production in Year 2 be in the best interests of the company if sales are expected to continue to be 2,700 units per year? O Yes O No