END
	ENDING INVENTORY:	YEAR 1	Year 2
	Units in beginning inventory	0	2000
	Units produced during the year	10000	6000
	Units sold during the year	8000	8000
	Units in ending inventory	2000	0
	ABSORPTION COSTING UNIT PRODUCT COST:
	Direct materials	11.00	11.00
	Direct labor	6.00	6.00
	Variable manufacturing overhead	3.00	3.00
	Fixed manufacturing overhead	12.00	20.00
	Absoption costing unit product cost	32.00	40.00
	ABSORPTION COSTING INCOME STATEMENT:
	Sales	400000	400000
	Cost of goods sold	256000	304000
	Gross margin	144000	96000
	Selling and administrative expenses	102000	102000
	Net operating income	42000	-6000
	VARIABLE COSTING UNIT PRODUCT COST:
	Direct materials	11.00	11.00
	Direct labor	6.00	6.00
	Variable manufacturing overhead	3.00	3.00
	Variable costing unit product cost	20.00	20.00
	VARIABLE COSTING INCOME STATEMENT:	YEAR 1		YEAR 2
	Sales		400000		400000
	Variable expenses:
	Cost of goods sold	160000		160000
	Variable selling and administrative expenses	32000	192000	32000	192000
	Contribution margin		208000		208000
	Fixed expenses:
	Fixed manufacturing overhead	120000		120000
	Fixed selling and administrative expenses	70000	190000	70000	190000
	Net operating income		18000		18000

Thank you for putting time for answering them.

3 Data 4 Selling price per unit 5 Manufacturing costs 6 Variable per unit produced 7 Direct materials 8 Direct labor 9 Variable manufacturing overhead 10 Fixed manufacturing overhead per year 11 Selling and administrative expenses 12 Variable per unit sold 13 Fixed per year 14 15 $50 $11 $6 $3 $120,000 $4 $70,000 Year 1 Year 2 16 17 18 Units in beginning inventory Units produced during the year Units sold during the year 10,000 8,000 6,000 8,000 19 20 21 Enter a formula into each of the cells marked with a? below Review Problem 1: Contrasting Variable and Absorption Costing 2. Change all of the numbers in the data area of your worksheet so that it looks like this 1 Chapter 6: Applying Excel 2 3 Data 4 Selling price per unit Manufacturing costs Variable per unit produced 291 5 6 Direct materials Direct labor Variable manufacturing overhead 116 53 35 S 142,600 8 9 10 Fixed manufacturing overhead per year 11 Selling and administrative expenses 12 Variable per unit sold 13 Fixed per year 14 15 16 Units in beginning inventory 17 Units produced during the year 18 Units sold during the year 9 S 69,000 Year 1 Year 2 3,100 2,600 2,300 2,600 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 overheed 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 $50,000 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 4,600 units (a) Would this change result in a bonus being paid to the CEO? O Yes No (b) What is the net operating income (loss) in Year 2 under absorption costing? 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 2,600 units per year? Yes No