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EXERCISE 7-1 Variable and Absorption Costing Unit Product Costs LO7-1 Ida Sidha Karya Company is a family-owned company located in the village of Gianyar on
EXERCISE 7-1 Variable and Absorption Costing Unit Product Costs LO7-1 Ida Sidha Karya Company is a family-owned company located in the village of Gianyar on the island of Bali in Indonesia. The company produces a handcrafted Balinese musical instrument called a gamelan that is similar to a xylophone. The gamelans are sold for $850. Selected data for the company's operations last year follow: Units in beginning inventory . . 0 Units produced ....... 250 Units sold . . ...... 225 Units in ending inventory . . . 25 Variable costs per unit: Direct materials . . .... $100 Direct labor. . ...... $320 Variable manufacturing overhead .. ..... $40 Variable selling and administrative. ....... $20 Fixed costs: Fixed manufacturing overhead . . . . . . . . . . $60,000 Fixed selling and administrative . .... . $20,000 Required: 1. Assume that the company uses absorption costing. Compute the unit product cost for one gamelan. 2. Assume that the company uses variable costing. Compute the unit product cost for one gamelan.EXERCISE 7-2 Variable Costing Income Statement; Explanation of Difference in Net Operating Income L07-2 Refer to the data in Exercise 7-1 for Ida Sidha Karya Company. The absorption costing income statement prepared by the company's accountant for last year appears as shown: Sales . ... $191,250 Cost of goods sold.. 157,500 Gross margin ....... 33,750 Selling and administrative expense 24,500 Net operating income . .... $ 9,250 Required: 1. Under absorption costing, how much fixed manufacturing overhead cost is included in the company's inventory at the end of last year? 2. Prepare an income statement for last year using variable costing. What is the amount of the difference in net operating income between the two costing methods?EXERCISE 7-4 Basic Segmented Income Statement LO7-4 Royal Lawncare Company produces and sells two packaged products-Weedban and Greengrow. Revenue and cost information relating to the products follow: Product Weedban Greengrow Selling price per unit . . . .. $6.00 $7.50 Variable expenses per unit. . . $2.40 $5.25 Traceable fixed expenses per year . . . . $45,000 $21,000 Common fixed expenses in the company total $33,000 annually. Last year the company produced and sold 15,000 units of Weedban and 28,000 units of Greengrow. Required: Prepare a contribution format income statement segmented by product lines
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