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 $200,000 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 5,600 units. (a) Would this change result in a bonus being paid to the CEO? 0 Yes (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 2,900 units per year? O Yes O No Chapter 7: Applying Excel: Exercise 2. Change all of the numbers in the data area of your worksheet so that it looks like this: A B 1 Chapter 7: Applying Excel 2 3 Data 4 $ 394 5 Selling price per unit Manufacturing costs: Variable per unit produced: Direct materials 6 7 $ 157 8 Direct labor $ 76 $ 30 $ 173,600 9 Variable manufacturing overhead 10 Fixed manufacturing overhead per year 11 Selling and administrative expenses: 12 Variable per unit sold $ 3 13 Fixed per year $ 76,000 14 Year 1 Year 2 0 15 16 Units in beginning inventory 17 Units produced during the year 18 Units sold during the year 3,100 2,800 2,900 2,900 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? Answer is complete and correct. Net operating income $ 132,800 (b) What is the net operating income (loss) in Year 2 under absorption costing? Answer is complete but not entirely correct. Net operating income $ 116,600 X (c) What is the net operating income (loss) in Year 1 under variable costing? Answer is complete and correct. Net operating income $ 121,600 (d) What is the net operating income (loss) in Year 2 under variable 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 $200,000 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 5,600 units. (a) Would this change result in a bonus being paid to the CEO? 0 Yes (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 2,900 units per year? O Yes O No Chapter 7: Applying Excel: Exercise 2. Change all of the numbers in the data area of your worksheet so that it looks like this: A B 1 Chapter 7: Applying Excel 2 3 Data 4 $ 394 5 Selling price per unit Manufacturing costs: Variable per unit produced: Direct materials 6 7 $ 157 8 Direct labor $ 76 $ 30 $ 173,600 9 Variable manufacturing overhead 10 Fixed manufacturing overhead per year 11 Selling and administrative expenses: 12 Variable per unit sold $ 3 13 Fixed per year $ 76,000 14 Year 1 Year 2 0 15 16 Units in beginning inventory 17 Units produced during the year 18 Units sold during the year 3,100 2,800 2,900 2,900 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? Answer is complete and correct. Net operating income $ 132,800 (b) What is the net operating income (loss) in Year 2 under absorption costing? Answer is complete but not entirely correct. Net operating income $ 116,600 X (c) What is the net operating income (loss) in Year 1 under variable costing? Answer is complete and correct. Net operating income $ 121,600 (d) What is the net operating income (loss) in Year 2 under variable costing
