M Question 3 - Connect Chapter X * Homework Help - Q&A from Or + C A ezto.mheducation.com/ext/map/index.html?_con=con&external_browser=0&launchUrl=https%253A252F%252Fnewconnect.mheducation.com%252F#/... ( * # D Update : Connect Chapter 8 i Saving Help Save & Exit Submit Check my work 3 ElectronPlus manufactures and sells a unique electronic part. Operating results for the first three years of activity were as follows (absorption costing basis): Year 1 Year 2 Year 3 Sales $1, 033, 000 $826, 400 $1, 064, 000 30 Cost of goods sold: points Beginning inventory 283, 000 Add: cost of goods manufactured 800 , 000 837 ,000 756, 000 Goods available for sale 800,000 837,000 1, 039,000 Less: ending inventory 0 283,000 177 , 000 Cost of goods sold 800, 000 554,00 862, 000 Gross margin 233,000 272, 400 202, 000 eBook Selling and administrative expenses 162, 000 59, 400 212 , 000 Operating income (loss) 71, 000 $213, 000 $ (10, 000) Print Sales dropped by 20% during year 2 due to the entry of several foreign competitors into the market. ElectronPlus had expected sales to remain constant at 47,000 units for the year; production was set at 57,000 units in order to build a buffer against unexpected spurts References in demand. By the start of year 3, management could see that spurts in demand were unlikely and that the inventory was excessive. To work off the excessive inventories, ElectronPlus cut back production during year 3, as shown below: Year 1 Year 2 Year 3 Production in units 47,000 57,000 37,000 Sales in units 47,000 37,000 47,000 Additional information about the company follows: a. The company's plant is highly automated. Variable manufacturing costs (direct materials, direct labour, and variable manufacturing overhead) total only $4 per unit, and fixed manufacturing overhead costs total $661,000 per year. b. Fixed manufacturing overhead costs are applied to units of product on the basis of each year's planned production. (That is, a new fixed overhead rate is computed each year). c. Variable selling and administrative expenses are $2 per unit sold. Fixed selling and administrative expenses total $72,000 per year. d. The company uses a FIFO inventory flow assumption. The management of ElectronPlus can't understand why profits tripled during year 2 when sales dropped by 20%, and why a loss was incurred during year 3 when sales recovered to previous levels. Mc Graw m Question 3 - ConnectChapter x t Homework Help - Gil-A lrorn ( x + v \"9mo- Connect Chapter 8 0 Saving... Help Save& em Submit Check my work 3 b. Reconcile the variable costing and absorption costing operating income gures for each year. (Losses and deductible amounts should be Indicated by a minus sign. Do not leave any empty spaces; Input a O wherever it Is required. Round your intermediate calculations to 2 decimals and round your final answer to the nearest whole dollar.) 30 points Variable costing operating income (loss) 5 13.000 5 (128,600) $ 45.000 El Add (Ded uot): Fixed manufacturing overhead cost deferred in inventory from Year 2 to Year 3 under absorption ousting . 231.000 (231,000) eBook Add: Fixed manu'lacturing overhead cost deferred in inventory from Year 3 to the future under absorption costing 173,600 Absorption ousting operating income (loss) $ 13.000 3 102,400 5 (3,400) B Print Reference: 3. This part of the question is not part of your Connect assignment. 4. This part of the question is not part of your Connect assignment. 5-a. This part of the question is not part of your Connect assignment. 5-1:. If lean production had been in use during year 2 and year 3, what would the company's operating income [or loss] have been in each year under absorption costing? (Loss amounts should be indicated by a minus sign.) Operatin Dome (loss) $ 22,180 _ MC y-w