ACC 202: Managerial Accounting (4226_E0Z1)

Ch 19: Assessment

1.Sims Company began operations on January 1. Its cost and sales information for this year follow.

Direct materials	$ 40	per unit
Direct labor	$ 60	per unit
Variable overhead	$ 20	per unit
Fixed overhead	$ 8,000,000	per year
Variable selling and administrative expenses	$ 11	per unit
Fixed selling and administrative expenses	$ 5,000,000	per year
Units produced	100,000	units
Units sold	70,000	units
Sales price	$ 360	per unit

1. Prepare an income statement for the year using variable costing. 2. Prepare an income statement for the year using absorption costing.

Prepare an income statement for the year using variable costing.

SIMS COMPANY
Income Statement (Variable Costing)
Sales
		0
		0
Income

Prepare an income statement for the year using absorption costing.

SIMS COMPANY
Income Statement (Absorption Costing)
	0
	$0

2. Kenzi, a manufacturer of kayaks, began operations this year. During this year, the company produced 1,050 kayaks and sold 800 at a price of $1,050 each. At year-end, the company reported the following income statement information using absorption costing.

Sales (800 $1,050)	$ 840,000
Cost of goods sold (800 $450)	360,000
Gross profit	480,000
Selling and administrative expenses	220,000
Income	$ 260,000

Additional Information

a. Product cost per kayak under absorption costing totals $450, which consists of $350 in direct materials, direct labor, and variable overhead costs and $100 in fixed overhead cost. Fixed overhead of $100 per unit is based on $105,000 of fixed overhead per year divided by 1,050 kayaks produced. b. The $220,000 in selling and administrative expenses consists of $85,000 that is variable and $135,000 that is fixed. Prepare an income statement for the current year under variable costing.

KENZI
Income Statement (Variable Costing)
Income