Question
2 . Change all of the numbers in the data area of your worksheet so that it looks like this: Chapter 6: Applying Excel Data
2. Change all of the numbers in the data area of your worksheet so that it looks like this:
Chapter 6: Applying Excel | ||
Data | ||
Selling price per unit | $290 | |
Manufacturing costs: | ||
Variable per unit produced: | ||
Direct materials | $126 | |
Direct labor | $54 | |
Variable manufacturing overhead | $27 | |
Fixed manufacturing overhead per year | $118,800 | |
Selling and administrative expenses: | ||
Variable per unit sold | $8 | |
Fixed per year | $55,000 | |
Year 1 | Year 2 | |
Units in beginning inventory | 0 | |
Units produced during the year | 2,700 | 2,200 |
Units sold during the year | 2,300 | 2,300 |
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? (Loss amounts should be indicated with a minus sign.)
Net operating income or Net operating loss? ____
(b) What is the net operating income (loss) in Year 2 under absorption costing? (Loss amounts should be indicated with a minus sign.)
Net operating income or Net operating loss? ____
(c) What is the net operating income (loss) in Year 1 under variable costing? (Loss amounts should be indicated with a minus sign.)
Net operating income or Net operating loss? ____
(d) What is the net operating income (loss) in Year 2 under variable costing? (Loss amounts should be indicated with a minus sign.)
Net operating income or Net operating loss? ____
(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.) Check all that apply:
_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 companys board of directors set a target for Year 2 of net operating income of $50,000 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 4,400 units.
(a) Would this change result in a bonus being paid to the CEO?
Multiple choice 1: Yes or No
(b) What is the net operating income (loss) in Year 2 under absorption costing? (Loss amounts should be indicated with a minus sign.)
(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 2,300 units per year?
Multiple choice 2: Yes or No
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