Chapter 6: Applying Excel IN Data 4 Selling price per unit $50 Manufacturing costs: 6 Variable per unit produced: 7 Direct materials $11 8 Direct labor $6 9 Variable manufacturing overhead $3 10 Fixed manufacturing overhead per year $120,000 11 Selling and administrative expenses: 12 Variable per unit sold $4 13 Fixed per year $70,000 14 15 Year 1 Year 2 16 Units in beginning inventory 0 17 Units produced during the year 10,000 6,000 18 Units sold during the year 8,000 8,000 19 20 Enter a formula into each of the cells marked with a ? below 21 Review Problem 1: Contrasting Variable and Absorption Costing 22 23 Compute the Ending Inventory 24 Year 1 Year 2 25 Units in beginning inventory 0 2,000 26 Units produced during the year 10,000 6,000 27 Units sold during the year 8,000 6,000 28 Units in ending inventory 2,000 2,000 29 30 Compute the Absorption Costing Unit Product Cost 31 Year 1 Year 2 32 Direct materials $11 $11 33 Direct labor 6 632 33 34 35 36 37 33 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 Direct materials $11 $11 Direct labor 6 6 Variable manufacturing overhead 3 3 Fixed manufacturing overhead 12 12 Absorption costing unit product cost $32 $40 Construct the Absorption Costing income Statement Year 1 Year 2 Sales $ 400,000 $ 300,000 Cost of goods sold 256,000 240,000 Gross margin 144,000 60,000 Selling and administrative expenses 102,000 94,000 Net operating income $ 42.000 $ 34,000 Compute the Variabie Costing Unit Product Cost Year 1 Year 2 Direct materials $11 $11 Direct labor 6 6 Variable manufacturing overhead 3 3 Variable costing unit product cost $20 $20 Construct the Variabie Costing income Statement Year 1 Sales $ 400,000 Variable expenses: Variable cost of goods sold $ 160,000 Variable selling and administrative expenses 32,000 192,000 Contribution margin 208,000 Fixed expenses: Fixed manufacturing overhead 120,000 Fixed selling and administrative expenses 70,000 190,000 Net operating income $ 18,000 Year 2 $ 300,000 $120,000 24,000 144,000 156,000 120,000 70,000 190,000 $ (34,000) 2: Change all of the numbers in the data area of your worksheet so that it looks like this: A B C 1 Chapter 5: Applying Excel 2 3 Data 4 Selling price per unit $ 377 5 Manufacturing costs: 6 Variable per unit produced: 7 Direct materials $ 141 8 Direct labor $ 75 9 Variable manufacturing overhead $ 33 10 Fixed manufacturing overhead per year $ 183,600 11 Selling and administrative expenses: 12 Variable per unit sold 33 3 1 3 Fixed per year $ 100,000 14 15 16 Year 1 Year 2 17 Units in beginning inventory 0 18 Units produced during the year 3,400 2700 Units sold during the year 2,900 2,900 If your formulas are correct. you should get the correct answers to the following questions. (a) What is the net operating income (loss) in Yeari under absorption costing? (Loss amounts should be indicated with a minus sign.) :l:| (b) What is the net operating income (loss) in Year 2 under absorption costing? (Loss amounts should be indicated with a minus sign.) :I':I (c) What is the net operating income (loss) in Year 'I under variable costing? (Loss amounts should be indicated with a minus sign.) :i:l (d) What is the net operating income (loss) in Year 2 under variable costing? (Loss amounts should be indicated with a minus sign.) :I':I (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.) a 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 ofthe fixed manufacturing overhead ofthe period was released from inventories under absorption costing. 3. Make a note ofthe absorption costing net operating income (loss) in Year 2. At the end of Year 'I, the company's 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 5,400 units. (a) Would this change result in a bonus being paid to the CEO? 0 Yes O No (b) What is the net operating income (loss) in Year 2 under absorption costing? (Loss amounts should be indicated with a minus sign.) ::1 3. Make a note of the absorption costing net operating income (loss) in Year 2. At the end of Year 1, the com pany's 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 5,400 units. (a) Would this change result in a bonus being paid to the CEO? 0 Yes O No (b) What is the net operating income (loss) in Year 2 under absorption costing? {Loss amounts should be indicated with a minus sign.) ::| (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 2,900 units per year? 0 Yes O No