$50 3 Data 4 Selling price per unit 5 Manufacturing costs 6 Variable per unit produced Direct materials $11 Direct Inbor $8 9 Variable manufacturing overhead $3 10 Fixed manufacturing overhead per year $120,000 11 Selling and administrative expenses 12 Variable per unit sold $4 13 Fixed per year $70,000 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 Enter a formula into ench of the cells marked with a ? below 21 Review Problem 1: Contrasting Variable and Absorption Costing 22 23 Compute the Ending Inventory 24 Year 1 Year 2 25 Units in beginning inventory 0 ? 26 Units produced during the year 2 3 27 Units sold during the year 2 ? 28 Units in ending Inventory 2 ? 29 30 Compute the Absorption Costing Unit Product Cost 31 Year 1 Year 2 32 Direct materials 7 2 33 Direct labor ? ? 34 Variable manufacturing overhead 7 7 35 Fixed manufacturing overhead 2 ? 36 Absorption costing unit product cast 7. ? 37 38 Construct the Absorption Costing Income Statement 39 Year 1 Year 2 40 Sales 7 2 41 Cost of goods sold 2 2 42 Gross margin 7 ? 43 Selling and administrative expenses 2 ? 44 Net operating income 2 7 45 46 Compute the Variable Costing Unit Product Cost 47 Year 1 Year 2 48 Direct materials 2 2 49 Direct labor ? 2 50 Variable manufacturing overhead 2 ? 51 Variable costing unit product cost ? ? 52 53 Construct the Variable Costing Income Statement 54 Year 1 55 Sales 2 56 Valable expenses 57 Variable cost of goods sold 7 58 Variable selling and administrative expenses 2 ? 59 Contribution margin 7 60 Fixed expenses 61 Fixed manufacturing overhead ? 62 Fixed selling and administrative expenses ? ? 63 Net operating income 2 Year 2 ? ? 2 ? ? 2 Chanter 7 Form Required information Chapter 7: Applying Excel: Excel Worksheet (Algo) (Part 1 of 2) Step Download the Applying Excel form located on the left-hand side, under files. If you have trouble, the file is also located in D2L under Course Files and Resources Step 2: Then enter formulas in all cells that contain question marks. For example, in cell B26 enter the formula - B17". After entering formulas in all the cells that contained question marks, verify that the dollar amounts match the numbers in Review Problem 1. Step 3: The LIFO inventory flow assumption is used throughout the problem. Check your worksheet by changing the units sold in the Data to 6,000 for Year 2. The cost of goods sold under absorption costing for Year 2 should now be $240,000. If it isn't, check cell C41. The formula In this cell should be -IF(C26C27,026C36(C27-C26)*836,C27C36). If your worksheet is operating properly. the net operating Income under both absorption costing and variable costing should be $(34,000) for Year 2. That is, the loss in Year 2 is $34,000 under both methods. If you do not get these answers, find the errors in your worksheet and correct them. Assume that the units produced in year 2 were sold first Step 4: Proceed to the requirements below only after completing your worksheet as it will be used to answer the following questions. 2. Change all of the numbers in the data area of your worksheet so that it looks like this: es B C A Chapter 6: Applying Excel 1 2 3 4 $ 381 5 6 7 146 Data Selling price per unit Manufacturing costs Variable per unit produced Direct materials Direct labor Variable manufacturing overhead Fored manufacturing overhead per year Selling and administrative expenses Variable per unit sold Forced per year $ $ 8 77 $ 28 $ 173,600 $ $ 2 81,000 9 10 11 12 13 14 15 16 17 18 Year 1 Year 2 Units in beginning inventory Units produced during the year Units sold during the year 0 3.100 2.900 2.800 2,900 Part 2 of 2 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? 0.55 points eBook Fles Print References (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 varlable costing? 2 Required information 12 (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 Yea 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.) ces Units were let 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 fived 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 $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? O Yes ONO (b) What is the net operating income (loss) in Year 2 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 $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? O Yes O 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 2,900 units per year? Yes O NO