It is the end of 2020. Amazing All-Fixed Corporation began operations in January 2019. The company...
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It is the end of 2020. Amazing All-Fixed Corporation began operations in January 2019. The company is so named because it has no variable costs. All its costs are fixed; they do not vary with output Amazing All-Fixed Corp. is located on the bank of a river and has its own hydroelectric plant to supply power, light, and heat. The company manufactures a synthetic fertilizer from air and river water and sells its product at a price that is not expected to change. It has a small staff of employees, all paid fixed annual salaries. The output of the plant can be increased or decreased by pressing a few buttons on a keyboard. The following budgeted and actual data are for the operations of Amazing All-Fixed. Requirement 1. Prepare income statements with one column for 2018, one column for 2020, and one column for the 2 years together using (a) variable costing and (b) absorption costing. (Use parentheses or a minus sign for an operating loss.) Start by preparing the (a) variable costing Income statement for 2019, 2020, and the 2 year total. Revenue Fixed costs Manufacturing costs 2019 2020 Total | Operating costs Total fixed costs Operating income (loss) Now prepare the (b) absorption costing income statement for 2019, 2020, and the 2 year total. (Enter a "0" for any 50 balances. Use parentheses or a minus sign for an operating loss. Label each variance as favorable (F) or unfavorable (U). Use units of production as the denominator level in the allocation rate.) 2019 Total 2020 Revenue Cost of goods sold Beginning inventory Allocated fixed manufacturing costs Deduct ending inventory Adjustment for production-volume variance Total cost of goods sold Gross margin Operating costs Operating income (loss) Requirement 2. What is the breakeven point under (a) variable costing and (b) absorption coeling? Start by calculating the breakeven point under (a) variable costing. (Round your answer up to the nearest unit.) Breakeven point under variable costing Requirements - Data table 1. Prepare income statements with one column for 2019, one column for 2020, and one column for the 2 years together using (a) variable costing and (b) absorption costing. 2. What is the breakeven point under (a) variable costing and (b) absorption costing? 3. What inventory costs would be carried in the balance sheet on December 31, 2019 and 2020, under each method? 4. Assume that the performance of the top manager of Amazing All - Fixed is evaluated and rewarded largely on the basis of reported operating income. Which costing method would the manager prefer? Why? Print Done The company uses budgeted production as the denominator level and writes off any production-volume variance to cost of goods sold. Sales Production Selling price Costs (all fixed): Manufacturing 2020a 50,000 tons 0 tons 2019 50,000 tons 100,000 tons $100 per ton $100 per ton $4,800,000 $4,800,000 $106,000 Operating (nonmanufacturing) $106,000 *Management adopted the policy, effective January 1, 2020, of producing only as much product as needed to fill sales orders. During 2020, sales were the same as for 2019 and were filled entirely from inventory at the start of 2020. - It is the end of 2020. Amazing All-Fixed Corporation began operations in January 2019. The company is so named because it has no variable costs. All its costs are fixed; they do not vary with output Amazing All-Fixed Corp. is located on the bank of a river and has its own hydroelectric plant to supply power, light, and heat. The company manufactures a synthetic fertilizer from air and river water and sells its product at a price that is not expected to change. It has a small staff of employees, all paid fixed annual salaries. The output of the plant can be increased or decreased by pressing a few buttons on a keyboard. The following budgeted and actual data are for the operations of Amazing All-Fixed. Requirement 1. Prepare income statements with one column for 2018, one column for 2020, and one column for the 2 years together using (a) variable costing and (b) absorption costing. (Use parentheses or a minus sign for an operating loss.) Start by preparing the (a) variable costing Income statement for 2019, 2020, and the 2 year total. Revenue Fixed costs Manufacturing costs 2019 2020 Total | Operating costs Total fixed costs Operating income (loss) Now prepare the (b) absorption costing income statement for 2019, 2020, and the 2 year total. (Enter a "0" for any 50 balances. Use parentheses or a minus sign for an operating loss. Label each variance as favorable (F) or unfavorable (U). Use units of production as the denominator level in the allocation rate.) 2019 Total 2020 Revenue Cost of goods sold Beginning inventory Allocated fixed manufacturing costs Deduct ending inventory Adjustment for production-volume variance Total cost of goods sold Gross margin Operating costs Operating income (loss) Requirement 2. What is the breakeven point under (a) variable costing and (b) absorption coeling? Start by calculating the breakeven point under (a) variable costing. (Round your answer up to the nearest unit.) Breakeven point under variable costing Requirements - Data table 1. Prepare income statements with one column for 2019, one column for 2020, and one column for the 2 years together using (a) variable costing and (b) absorption costing. 2. What is the breakeven point under (a) variable costing and (b) absorption costing? 3. What inventory costs would be carried in the balance sheet on December 31, 2019 and 2020, under each method? 4. Assume that the performance of the top manager of Amazing All - Fixed is evaluated and rewarded largely on the basis of reported operating income. Which costing method would the manager prefer? Why? Print Done The company uses budgeted production as the denominator level and writes off any production-volume variance to cost of goods sold. Sales Production Selling price Costs (all fixed): Manufacturing 2020a 50,000 tons 0 tons 2019 50,000 tons 100,000 tons $100 per ton $100 per ton $4,800,000 $4,800,000 $106,000 Operating (nonmanufacturing) $106,000 *Management adopted the policy, effective January 1, 2020, of producing only as much product as needed to fill sales orders. During 2020, sales were the same as for 2019 and were filled entirely from inventory at the start of 2020. -
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