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Follow Spreadsheet layout and format. Please dont skip a section Chapter 6 Variable and Absorption Costing Chapter 6 Homework Problem B My Company produced 26,000

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Follow Spreadsheet layout and format. Please dont skip a section
Chapter 6 Variable and Absorption Costing Chapter 6 Homework Problem B My Company produced 26,000 units during February. Direct materials costs are $3.75 per unit and direct labor is $4.50 per unit. Variable overhead is applied at $5 per unit and fixed overhead is $65,000 per month. Sales commissions are $0.75 per unit sold. Sales salaries for the month are $50,000 and fixed administrative expenses are $10o,000. Required: a. Calculate production cost per unit under variable and absorption costing b. Prepare an income statement under variable costing and under absorption costing for February assuming all 26,000 units produced were sold for $25 each c. During March, My Company produced 26,000 units and sold 20,000 units Prepare an income statement under variable and under absorption costing for March assuming each unit sold for $25 each d. Is the February net income different under each method? Why or why not? What about March, is the net income different? Why or why not? Adapted from "Accounting Principles: A Business Perspective, Managerial Accounting A Textbook Equity Open College Textbook originally by Hermanson, Edwards, and Maher D F H C E Chapter 6 Homework 1 Solution Code 2 3 (a) Calculate product costs 4 Variable Absorption Direct Materials Direct Labor Variable OH 6 Fixed OH Hint? Use in Absorption only. Calculate per unit cost as Fixed Product Cost per unit Product cost check 9 Overhead/Units PRODUCED 10 Correct Cornect 11 (b) Prepare February Income Statements 12 13 14 My Company Variable Costing Income Statement For Month Ended February 28 15 16 17 Sales Hint? February sales units x Feb. sales price per unit 18 Less: Variable Costs Calculate Variable Costs as Cost per unit x Units SOLD Hint? 19 Production Cost Hint? Use Variable product cost calculated in part A 20 Sales Commission Hint? Use sales commission given in problem x units sold 21 Total variable costs Contribution Margin 22 Hint? Sales-Variable Costs 23 Less: Fixed Costs 24 Fixed Overhead Hint? Use FULL amount given in problem. 25 Sales Salaries 26 Admin Expenses 27 Total fixed costs 28 Net Income 29 Net Income check 30 30 My Company 31 Absorption Costing Income Statement For Month Ended February 28 32 34 Sales Less Cost of Goods Sold: 35 Use Absorption product cost calculated in part A x units Hint? 36 Production Cost SOLD Gross Profit 37 38 Operating Expenses: Use sales commission given in problem x units sold 39 Hint? Sales Commissions 40 Sales Salaries Total Selling exp 41 42 Admin Expenses 43 Total Expenses 44 Net Income 45 Net income check: 46 (c) Prepare March Income Statements (USE APPROPRIATE FORMATS AND LABEL EVERY NUMBER) 47 48 49 My Company 50 Variable Costing Income Statement 51 For Month Ended March 31 53 53 54 56 57 S8 59 60 61 62 63 Net Income 64 Net income check 65 My Company 66 Absorption Costing Income Statement 67 For Month Ended March 31 68 60 70 71 72 73 74 75 76 77 78 79 Net Income Correct 80 Net income check: 81 83 84 February net income: 85 Show net income reconciliation of variable and absorption costing: 86 87 Fixed Overhead Fixed OH applied Hint? Full Fixed overhead amount used in Variable Costing 88 From absorption costing, Fixed overhead per unit x Hint? units sold 89 Difference 90 91 Income under Absorption 92 Income under Variable 93 Difference This should match differenc ixe erhead Hint? calculated above. 94 95 March net income: 96 Show net income reconciliation of variable and absorption costing: 97 98 Fixed Overhead Fixed OH applied 99 100 Difference 101 Hint? March completed like February (see hints above) 102 Income under Absorption 103 Income under Variable Difference 104 105 G C This should match difference for fixed overhead Difference Hint? 93 calculated above. 94 95 March net income: 96 Show net income reconciliation of variable and absorption costing: 97 98 Fixed Overhead Fixed OH applied 99 100 Difference 101 Hint? March completed like February (see hints above) Income under Absorption Income under Variable Difference 102 103 104 105 106 107 Remember these points: 1. Variable costing does not include fixed overhead IN PRODUCT COSTS but does include 108 it when calculating net income as a fixed period cost. 2. Absorption costing includes fixed overhead in PRODUCTS COSTS but applies it to the number of units produced when calculating product cost per unit. 109 3. Variable and Absorption costed income statements will show the same net income with units produced units sold. 110 4. Income Statements (under both absorption and variable costing) calculate all variable and product costs as the cost per unit x UNITS SOLD. 111

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