A32 X V fx A B C D E F XYZ Company anticipates the following costs during the first year of operations. The company is attempting to project profitability if 100% of production is sold, and if 75% of production is sold. Use the pick lists associated with the boxed areas to select amounts for each cost category in the absorption and variable costing income statements that follow. Correct selections will turn the boxed areas green. Afterwards, answer the questions at the bottom of the spreadsheet. 2 3 Direct materials $ 150,000 4 Direct labor 75,000 5 Variable manufacturing overhead 25,000 6 Fixed manufacturing overhead 100,000 7 Variable selling, general, and administrative 10% of sales 8 Fixed selling, general, and administrative 50,000 9 XYZ CompanyA32 X V fx A B C D E F 9 XYZ Company ABSORPTON COSTING INCOME STATEMENT 10 For the Year Ending December 31, 20XX 11 Assumption >222 75% Sold 100% Sold 12 Sales 450,000 $ 600,000 13 Less: Cost of goods sold 262,500 350,000 14 Gross profit $ 187,500 $ 250,000 15 Less: SG&A 95,000 110,000 16 Income $ 92,500 $ 140,000 17 XYZ Company VARIABLE COSTING INCOME STATEMENT 18 For the Year Ending December 31, 20XX 19 Assumption >222 75% Sold 100% Sold Sales $ $ 20 450,000 600,000 21 Less: Variable product cost 187,500 250,000 22 Variable manufacturing margin $ 262,500 $ 350,000 Less: Variable SG&A 45,000 60,000 23 24 Contribution margin $ 217,500 $ 290,000 25 Less: Fixed expenses 150,000 150,000 26 Income $ 67,500 $ 140,000Notice that income is the same under absorption and variable costing if all production is sold. This is not true when only 75% of production is sold because all of the manufacturing overhead is charged against income under variable costing, but not absorption costing. 27 28 How much is ending inventory if 75% of the production is sold, and: XYZ uses absorption costing? >> > > $ 29 87,500 30 XYZ uses variable costing? > >> > 62,500 31 Notice that the $25,000 difference between ending inventory amounts ($87,500 and $62,500) is equal to the difference in income ($92,500 v. $67,500). This occurs because $25,000 of fixed manufacturing overhead is assigned to inventory under absorption costing but charged against income under variable costing. 32D Question 1 2 pts Under 100% sales assumption, using absorption costing, the COGS is calculated by adding Direct Material (DM), Direct Labor (DL), and Fixed Overhead (FOH). True O False D Question 2 2 pts Under 100% sales assumption, using absorption costing, the SG&A is calculated by adding Fixed SG&A, Variable SG&A, and Fixed Overhead (FOH). O True FalseQuestion 3 2 pts Under 75% sales assumption, using absorption costing, the COGS is calculated by adding Direct Material (DM), Direct Labor (DL), Variable Overhead (VOH), and Fixed Overhead (FOH) multiply by 75%. O True False D Question 4 2 pts Under 100% sales assumption, using absorption costing, the ending Inventory balance is? D Question 5 2 pts Under 75% sales assumption, using absorption costing, the ending Inventory balance is?D Question 6 2 pts Under 75% sales assumption, using variable costing, the ending Inventory balance is? D Question 7 2 pts Under 75% sales assumption, using variable costing, the ending Inventory balance can be calcualted by: (150,000 + 75,000 + 25,000) x 25% True FalseD Question 8 2 pts Under 75% sales assumption, using variable costing, the variable product cost balance can be calcualted by: (150,000 + 75,000 + 25,000) x 25% True False D Question 9 2 pts Under 75% sales assumption, using variable costing, the contribution margin balance can be calcualted by: Net Sales Less: (150,000 + 75,000 + 25,000) x 75% Less: 450,000 x 10% O True FalseD Question 10 2 pts Under Variable Costing, if a company produces more and sales less: The Net Income is LESS and the End Inventory is LESS. O True O False Quiz saved at 2:47am Submit Quiz