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7.1.5 Cost of Goods Manufactured, using Variable Costing and Absorption Costing On March 31, the end of the first year of operations, Barnard Inc., manufactured

7.1.5

Cost of Goods Manufactured, using Variable Costing and Absorption Costing

On March 31, the end of the first year of operations, Barnard Inc., manufactured 6,400 units and sold 5,500 units. The following income statement was prepared, based on the variable costing concept:

Barnard Inc. Variable Costing Income Statement For the Year Ended March 31, 20Y1
Sales $1,870,000
Variable cost of goods sold:
Variable cost of goods manufactured $1,043,200
Inventory, March 31 (146,700)
Total variable cost of goods sold (896,500)
Manufacturing margin $973,500
Total variable selling and administrative expenses (225,500)
Contribution margin $748,000
Fixed costs:
Fixed manufacturing costs $480,000
Fixed selling and administrative expenses 148,500
Total fixed costs (628,500)
Operating income $119,500

Determine the unit cost of goods manufactured, based on (a) the variable costing concept and (b) the absorption costing concept.

Variable costing $____
Absorption costing $____

The operating revenues of the three largest business segments for Time Warner, Inc., for a recent year follow. Each segment includes a number of businesses, examples of which are indicated in parentheses.

Time Warner, Inc. Segment Revenues (in millions)
Turner (cable networks and digital media) $15,000
Home Box Office (pay television) 93,900
Warner Bros. (films, television, and videos) 32,300

Assume that the variable costs as a percent of sales for each segment are as follows:

Turner 26%
Home Box Office 39%
Warner Bros. 31%

a. Determine the contribution margin and contribution margin ratio for each segment from the information given. When required, round to the nearest whole millionth (for example, round 5,688.7 to 5,689). Round contribution margin ratio to whole percents for each segment from the information given.

Turner Home Box Office Warner Bros.
Revenues $_____ $_____ $_____
Variable costs _____ ____ _____
Contribution margin $_____ $_____ $_____
Contribution margin ratio (as a percent) %_____ %_____ %_____

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