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allocated at $ 7 per machine - hour based on fixed manufacturing costs of $ 5 6 0 , 0 0 0 8 0 ,
allocated at $ per machinehour based on fixed manufacturing costs of $ machinehours, which is the level Osborne uses as its denominator level.
inventory in is units; ending inventory is units. Sales in are units.
The same standard unit costs persisted throughout and For simplicity, assume that there are no price, spending, or efficiency variances.
Required
Required
Requirement
Complete the
operating loss
Prepare an income statement for assuming that the productionvolume variance is written off
at yearend as an adjustment to cost of goods sold.
The president has heard about variable costing. She asks you to recast the statement as it
would appear under variable costing.
Explain the difference in operating income as calculated in requirements and
Graph how fixed manufacturing overhead is accounted for under absorption costing. That is there will
be two lines: one for the budgeted fixed manufacturing overhead which is equal to the actual fixed
manufacturing overhead in this case and one for the fixed manufacturing overhead allocated. Show
the productionvolume variance in the graph.
Critics have claimed that a widely used accounting system has led to undesirable buildups of
inventory levels. a Is variable costing or absorption costing more likely to lead to such buildups?
Why? b What can managers do to counteract undesirable inventory buildups?
ent to cost of goods sold.
e U Use parentheses or a minus sign for an
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