Emerson Corporation, which uses throughput costing, just completed its first year of operations. Planned and actual production equaled 10,000 units, and sales totaled 9,600 units at $72 per unit. Cost data for Problem 8-28 the year are as follows: Throughput Costing, Absorption Costing, and Direct material (per unit) . Variable Costing Conversion cost: $12 (LO 1, 2, 3, 7, 8) Direct labor ...."; 1. Total cost: $644.800 Variable manufacturing overhead 45,000 2. Year-end inventory. Fixed manufacturing overhead 65,000 throughput costing: $4.800 4. Operating income: Selling and administrative costs: 220,000 $51.200 Variable (per unit) ........." 8 Fixed ... 118,000 The company classifies only direct material as a throughput cost. Required: 1. Compute the company's total cost for the year assuming that variable manufacturing costs are driven by the number of units produced, and variable selling and administrative costs are driven by the number of units sold. 2 How much of this cost would be held in year-end inventory under (a) absorption costing, (b) variable costing, and (c) throughput costing? 3. How much of the company's total cost for the year would be included as an expense on the period's income statement under (a) absorption costing, (b) variable costing, and (c) throughput costing? 4. Prepare Emerson's throughput-costing income statement. 5. Build a spreadsheet: Construct an Excel spreadsheet to solve requirements (1) and (2) above. Show how the solution will change if the following information changes: the direct-material cost is. $1 1 per unit, and the total direct-labor cost is $46,000.Faster wireless Faster memory speed 2 940AX w21 7 (8 Dedicated VRAM is Core 15-720002 50it with # 1000 G8 HOG Chapter 8 Absorption and Variable Costing 377 Xiamen Lighting Company had operating income for the first 10 months of the current year of $200,000. One hundred thousand units were manufactured during this period (the same as the planned M Problem 8-27 production), and 100,000 units were sold. Fixed manufacturing overhead was $2,000,000 over the Variable and Absorption Costing 10-month period (i.e., $200,000 per month). There are no selling and administrative expenses for (LO 1, 4) Xiamen Lighting Company. Both variable and fixed costs are expected to continue at the same rates for the balance of the year (i.e., fixed costs at $200,000 per month and variable costs at the same 2(a). Contribution margin per variable cost per unit). Twenty thousand units are to be produced and 19,000 units are to be sold in 2(b). Projected operating unit: $22 total over the last two months of the current year. Assume the unit variable cost is the same in the income for the year under current year as in the previous year. (Hint: You cannot calculate revenue or cost of goods sold; you absorption costing: $178,000 must work directly with contribution margin or gross margin.) Required: 1. If operations proceed as described, will operating income be higher under variable or absorption costing for the current year in total? Why? 2. . If operations proceed as described, what will operating income for the year in total be under (a) variable costing and (b) absorption costing? 3. Discuss the advantages and disadvantages of absorption and variable costing. Problem 8-28
