Addison, Inc. makes a single product, an indoor fireplace, and has provided data from last year of operations. The Controller has asked you to compare income statements if the company used the variable costing approach vs. the absorption costing report. Use the information included in the Excel Simulation and the Excel functions described below to complete the task. s . Cell Reference: Allows you to refer to data from another tell in the worksheet. From the Excel Simulation below, if in a blank cell, "-83" was entered, the formula would output the result from cell B3, or 420 in this example. Basic Math functions: Allows you to use the basic math symbols to perform mathematical functions. You can use the following keys: + (plus sign to add). - (minus sign to subtract), (asterisk sign to multiply), and /(forward slash to divide). From the Excel Simulation below, if in a blank cell "-B15+B16" was entered, the formula would add the values from those cells and output the result, or 9,500 in this example. If using the other math symbols the result would output an appropriate answer for its function. SUM function: Allows you to refer to multiple cells and adds all the values. You can add individual cell references or ranges to utilize this function. From the Excel Simulation below, if in a blank cell "=SUM(B6, B7, B8)" was entered, the formula would output the result of adding those three separate cells, or 215 in this example. Similarly, if in a blank cell "=SUM(B6:B8)" was entered, the formula would output the same result of adding those cells, except they are expressed as a range in the formula, and the result would be 215 in this example. A1 V X fx A Addison, Inc. makes a single product, an indoor fireplace. Data for last year is as B C 1 Addison, Inc. makes a single product, an indoor fireplace. Data for last year is as follows: 2 3 Selling price per fireplace $420 4 Manufacturing costs: 5 Variable per unit produced: 6 Direct materials $135 7 Direct labor $43 8 Variable manufacturing overhead $37 9 Fixed manufacturing overhead per year $210,000 10 Selfing and administrative expenses: Variable per unit sold $45 $190,000 11 12 Fixed per year 13 14 Units in beginning inventory 15 Units produced during the year 16 Units sold during the year 17 18 Use the data to answer the following. 19 20 L. Assume the company uses variable costing: 21 22 Compute the unit product cost for one fireplace 23 24 Prepare a contribution margin income statement for the year READY Attempt(s) Sheet1 0 5,000 4,500 D E + 100% Hint C24 V fx A 24 Prepare a contribution margin income statement for the year 25 26 Sales 27 Variable expenses: 28 Variable cost of goods sold 29 Variable selling and administrative expenses 30 Contribution margin 31 Fixed expenses: 32 Fixed manufacturing overhead 33 Fixed selling and administrative expenses 34 Net operating income 35 36 Compute the number of fireplaces required to breakeven 37 38 2. Assume the company uses absorption costing: 39 40 Compute the unit product cost for one fireplace 41 42 Prepare an income statement for the year 43 44 Sales 45 Cost of goods sold 46 Gross margin 47 Selling and administrative expenses 48 Net operating income READY Attempt(s) Sheet1 D E B + 10 Hint The Chapter 6 Form worksheet is to be used to create your own worksheet version of the Review Problem in the text Change all of the numbers in the data area of your worksheet so that it looks like this: A B C 1 Chapter 6: Applying Excel 2 3 Data 4 Selling price per unit $ EA 293 5 Manufacturing costs: 6 Variable per unit produced: 7 Direct materials $ 69 159 8 Direct labor $ 64 9 Variable manufacturing overhead $ 21 10 Fixed manufacturing overhead per year $ 92,000 11 Selling and administrative expenses: 12 Variable per unit sold 13 Fixed per year $ 2 $ 40,000 14 15 16 Units in beginning inventory 17 Units produced during the year 18 Units sold during the year Year 1 Year 2 0 2,300 2,000 2,100 2,100 ces Required Information (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: (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.) 3. Units were left 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 fixed manufacturing overhead of the period was released from Inventories under absorption costing. 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 $10,000 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 4,000 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 2100 units per year? O Yes O No