2b. Using the information attached in photos: Reconcile the variable costing and absorption costing net operating income figures for each year
5B. If lean production had been used in year 2 and 3, what would the company's net operating income or loss have been in each year under absorption costing?
Students Home x Topic: Week 2 Graded X E Cost accounting come x Connect X M MHE Reader * *Assignment Print View X * ACCT5002HWSo1578. x + - C D ezto.mheducation.com/ext/map/index.html?_con=con&external_browser=0&launchUrl=https%253A%252F%252Fnewconnect.mheducation.com%252F#/activit... * K Error O i : Apps ye Swimsuit Sale: Sw.. @ > How To Hold Th... b New In | The hotte... Chiffon Ruched St... Clothing - Dresse. LookBookStore -.. Women's Maxi Dr.. f Clothing New Arri. Chapter 6 Homework Saved Help Save & Exit Submit Check my work mode : This shows what is correct or incorrect for the work you have completed so far. It does not indicate completion. Return to question 5 Starfax, Inc., manufactures a small part that is widely used in various electronic products such as home computers. Results for the first three years of operations were as follows (absorption costing basis): Year 1 Year 2 Year 3 Sales $ 803, 200 $ 642, 560 $ 803, 200 8 points Cost of goods sold 582 , 320 401, 600 622, 480 Gross margin 220, 880 240, 960 180, 720 Selling and administrative expenses 190, 760 180 , 720 170, 680 Net operating income (loss) $ 30, 120 $ 60,240 $ \\ 10, 040 In the latter part of Year 2, a competitor went out of business and in the process dumped a large number of units on the market. As a result, Starfax's sales dropped by 20% during Year 2 even though production increased during the year. Management had expected sales to remain constant at 50,200 units; the increased production was designed to provide the company with a buffer of protection against unexpected spurts in demand. By the start of Year 3, management could see that it had excess inventory and that spurts in demand were unlikely. To reduce the excessive inventories, Starfax cut back production during Year 3, as shown below: Year 1 Year 2 Year 3 Production in units 50, 200 60, 240 40, 160 Sales in units 50,200 40, 160 50, 200 Additional information about the company follows: a. The company's plant is highly automated. Variable manufacturing expenses (direct materials, direct labor, and variable manufacturing overhead) total only $2.00 per unit, and fixed manufacturing overhead expenses total $481,920 per year. b. A new fixed manufacturing overhead rate is computed each year based on that year's actual fixed manufacturing overhead costs divided by the actual number of units produced. c. Variable selling and administrative expenses were $1 per unit sold in each year. Fixed selling and administrative expenses totaled $140,160 per year. d. The company uses a FIFO inventory flow assumption. (FIFO means first-in first-out. In other words, it assumes that the oldest units in inventor, are cold firet ) Mc Graw Students Home x Topic: Week 2 Graded X E Cost accounting come x Connect X M MHE Reader * *Assignment Print View X * ACCT5002HWSo1578. x + - C D ezto.mheducation.com/ext/map/index.html?_con=con&external_browser=0&launchUrl=https%253A%252F%252Fnewconnect.mheducation.com%252F#/activit... * K Error O i : Apps ye Swimsuit Sale: Sw.. @ > How To Hold Th... b New In | The hotte.. Chiffon Ruched St.. Clothing - Dresse. LookBookStore -.. Women's Maxi Dr.. f Clothing New Arri. Chapter 6 Homework Saved Help Save & Exit Submit Check my work mode : This shows what is correct or incorrect for the work you have completed so far. It does not indicate completion. Return to question 5 Starfax's management can't understand why profits doubled during Year 2 when sales dropped by 20% and why a loss was incurred during Year 3 when sales recovered to previous levels. Required: 8 1. Prepare a variable costing income statement for each year. points 2. Refer to the absorption costing income statements above. a. Compute the unit product cost in each year under absorption costing. Show how much of this cost is variable and how much is fixed. b. Reconcile the variable costing and absorption costing net operating income figures for each year. 5b. If Lean Production had been used during Year 2 and Year 3, what would the company's net operating income (or loss) have been in each year under absorption costing? x Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Req 1 Req 2A Req 2B Req 5B Reconcile the variable costing and absorption costing net operating income figures for each year. (Enter any losses or deductions as a negative value.) Reconciliation of Variable Costing and Absorption Costing Net Operating Incomes Year 1 Year 2 Year 3 Variable costing net operating income (loss) $ 2 x $ 2 x $ 2 x Add fixed manufacturing overhead deferred in inventory 30,520 X (100,000) x 30,520 X Deduct fixed manufacturing overhead cost released from inventory (400) X 160,240 X (40,560) X Absorption costing net operating income (loss) $ 30,120 X $ 60,240 * (10.040) Mc Graw Students Home x Topic: Week 2 Graded X E Cost accounting come x Connect X M MHE Reader * *Assignment Print View X * ACCT5002HWSo1578. x + - C D ezto.mheducation.com/ext/map/index.html?_con=con&external_browser=0&launchUrl=https%253A%252F%252Fnewconnect.mheducation.com%252F#/activit... * K Error O i : Apps ye Swimsuit Sale: Sw.. @ > How To Hold Th... b New In | The hotte.. Chiffon Ruched St.. Clothing - Dresse. LookBookStore -.. Women's Maxi Dr.. f Clothing New Arri. Chapter 6 Homework Saved Help Save & Exit Submit Check my work mode : This shows what is correct or incorrect for the work you have completed so far. It does not indicate completion. Return to question 5 Starfax's management can't understand why profits doubled during Year 2 when sales dropped by 20% and why a loss was incurred during Year 3 when sales recovered to previous levels. Required: 8 1. Prepare a variable costing income statement for each year. points 2. Refer to the absorption costing income statements above. a. Compute the unit product cost in each year under absorption costing. Show how much of this cost is variable and how much is fixed. b. Reconcile the variable costing and absorption costing net operating income figures for each year. 5b. If Lean Production had been used during Year 2 and Year 3, what would the company's net operating income (or loss) have been in each year under absorption costing? * Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Req 1 Req 2A Req 2B Req 5B If Lean Production had been used during Year 2 and Year 3, what would the company's net operating income (or loss) have been in each year under absorption costing? Year 1 Net operating income $ 30,520 X Year 2 Net operating loss $ (100,000) X Year 3 Net operating income $ 30,520 X Req 2B Req 5B Mc Graw
