A B C D

1 Chapter 6: Applying Excel

2

3 Data

4 Selling price per unit $333

5 Manufacturing costs:

6 Variable per unit produced:

7 Direct materials $106

8 Direct labor $64

9 Variable manufacturing overhead $35

10 Fixed manufacturing overhead per year $117,600

11 Selling and administrative expenses:

12 Variable per unit sold $6

13 Fixed per year $61,000

14

15 Year 1 Year 2

16 Units in beginning inventory 0

17 Units produced during the year 2,800 2,100

18 Units sold during the year 2,400 2,400

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?

(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 variable costing?

(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 Year 2 because (Select all that apply.):

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 $160,000 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 4,200 units.

(a) Would this change result in a bonus being paid to the CEO?