Company manufacturers a

professionaldashgrade

vacuum cleaner and began operations in

20172017.

For

20172017,

ReginaRegina

budgeted to produce and sell

28 comma 00028,000

units. The company had no price, spending, or efficiency variances and writes off production-volume variance to cost of goods sold. Actual data for

20172017

are given as follows:

Units produced	25,000
Units sold	24,500
Selling price	$425
Variable costs:
Manufacturing cost per unit produced:
Direct materials	$31
Direct manufacturing labor	26
Manufacturing overhead	64
Marketing cost per unit sold	45
Fixed costs:
Manufacturing costs	$1,792,000
Administrative costs	1,045,100
Marketing costs	1,475,000

Read the requirements

1.	Prepare a 20172017 income statement for ReginaRegina Company using variable costing.
2.	Prepare a 20172017 income statement for ReginaRegina Company using absorption costing.
3.	Explain the differences in operating incomes obtained in requirements 1 and 2.
4.	ReginaRegina's management is considering implementing a bonus for the supervisors based on gross margin under absorption costing. What incentives will this bonus plan create for the supervisors? What modifications could ReginaRegina management make to improve such a plan? Explain briefly.

.Requirement 1. Prepare a

20172017

income statement for

ReginaRegina

Company using variable costing.

Complete the top half of the income statement first, then complete the bottom portion. (For amounts with a $0 balance, make sure to enter "0" in the appropriate cell.)

Variable Costing

	Operating income / (loss)

Requirement 2. Prepare a

20172017

income statement for

ReginaRegina

Company using absorption costing.

Complete the top half of the income statement first, then complete the bottom portion. (For amounts with a $0 balance, make sure to enter "0" in the appropriate cell. Label any variances as favorable (F) or unfavorable (U).)

Absorption Costing

	Operating income/(loss)

Requirement 3. Explain the differences in operating incomes obtained in requirements 1 and 2.

The difference in operating income under absorption costing and variable costing is $						. The 2017 operating income
under absorption costing is		than the operating income under variable costing because
						As a result, under
	costing, a portion of the			overhead remained in inventory and led to a
	cost of goods sold than under the other method.

Requirement 4.

ReginaRegina's

management is considering implementing a bonus for the supervisors based on gross margin under absorption costing. What incentives will this bonus plan create for the supervisors? What modifications could

ReginaRegina

management make to improve such a plan? Explain briefly.

What incentives will this bonus plan create for the supervisors?
What modifications could Regina management make to improve such a plan?

Choose from any list or enter any number in the input fields and then continue to the next question.