D E F A B 1 Chapter 6: Applying Excel 2 3 Data 4 Selling price per unit $50 5 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 ? 26 Units produced during the year ? ? 27 Units sold during the year ? 2 28 Units in ending inventory ? ? 29 30 Compute the Absorption Costing Unit Product Cost 31 Year 1 Year 2 32 Direct materials ? ? 33 Direct labor ? ? 34 Variable manufacturing overhead ? ? 35 Fixed manufacturing overhead ? ? 36 Absorption costing unit product cost ? ? 37 38 Construct the Absorption Costing Income Statement 39 Year 1 Year 2 40 Sales ? ? 41 Cost of goods sold ? ? 42 Gross margin ? ? 43 Selling and administrative expenses ? ? 44 Net operating income ? ? 45 46 Compute the Variable Costing Unit Product Cost 47 Year 1 Year 2 48 Direct materials ? ? 49 Direct labor ? ? 50 Variable manufacturing overhead ? ? 51 Variable costing unit product cost ? ? 52 53 Construct the Variable Costing Income Statement 54 Year 1 55 Sales ? 56 Variable expenses: 57 Variable cost of goods sold ? 58 Variable selling and administrative expenses 2 ? 59 Contribution margin ? 60 Fixed expenses 61 Fixed manufacturing overhead ? 62 Fixed selling and administrative expenses ? ? 63 Net operating income ? 64 HChapter 6 Form Filled in Chapter 6 Form Chapter 60 Year 2 ? ? ? ? ? ? ? ? A B 1 Chapter 6: Applying Excel Data 2 $ 310 3 Selling price per unit Manufacturing costs: Variable per unit produced: Direct materials 4 $ 133 5 $ 56 6 $ 26 Direct labor Variable manufacturing overhead Fixed manufacturing overhead per year Selling and administrative expenses: Variable per unit sold $ 183,600 7 $ 5 Fixed per year $ 108,000 8 9 Year 1 Year 2 0 Units in beginning inventory Units produced during the year Units sold during the year 3,400 3,000 2,700 3,000 If your formulas are correct, you should get the correct answers to the following questions. (a) What is the net operating income (loss) in Year 1 under absorption costing? (b) What is the net operating income (loss) in Year 2 under absorption costing? (c) What is the net operating income (loss) in Year 1 under variable costing? (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.) 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. 3. 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 $60,000 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? o Yes (b) What is the net operating income (loss) in Year 2 under absorption costing? Net operating income (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 3,000 units per year? o Yes No
