Mastery Problem: Variable Costing for Management Analysis Absorption vs. Variable Operating income is one of the most important items toorted by a comoww. Drenang on the decision making reeds of management, desting om te ding option coating er variatie con Select where the following characteristics are most then with stron coming out Required under werely accepted accounting roles (GM) Oftes ved for internate in desion making Cost of goods manufactured includes only vacancturing costs Usein resorts prepared for external Fixed factory overhead couts are not part of cost of goods manufactured to fived and variable factory costs are che in cost od pods sold and intory Absorption Statement Atrezeption costing does not distinguen utween various and falls costa. As marcacturing costs and dead in the cost of goods said Saxon, Inc Absorption Costing Income Statement For the Year Ended December 31 Sales $275,000 Cost of goods sold: Cost of goods manufactured 100.000 Ending inventory (120.000 Total cost of goods sold 550.000 Gross proft 3595.000 Beling and administrative expenses (265.000) Operating income $309.000 Variable statement Under vorte couting, the cost of goods manufactured includes only variable manufacturing costs. This type of income statement includes a computation of manufacture marin, Saxon, Inc. Variable Costing Income Statement For the Year Ended December 31 Sales 51,275,000 Variable court of soldi Variable cost of goods manufactured $560,000 Ending investory (94.000) Total variable con of goods sold (476,000) Manufacturing magi $79.000 Vatte sing and administrative expenses (221,000) Contribution margin $575.000 Fed manufacturing costs 5240.000 Fixed sling and dive expenses $5,000 Tocat fed costs (105,000) Operating income $273.000 Method Comparison Review the income statements on the Absorption Statement and a statement, the complete the following table. The company's sales propertis 575and the number of units in enang inventory is 3,000. There was no beginning inventory Item Amount Numer of units sold Variables and administrative cost per unit Number of units manufactured Variable cost of goods manufactured per unit Pie manufacturing cost per unit Manufacturing Decisions Whenever the units manufactured differ from the sits sofished goods invertory is attectad, naring coating come, such cases and decreases could be interpreted as operator neces. Each cien min situations becretulvany citing whether to or vartotecting reporting would be more A consore controllable in the longest one with for a level of management, consecratie cuts or collect The production manager for Saxon, Inc. 1 wore because me com IN DIE Showing a high enough profit looking at the come statements on the Asion Statement and the verbe Statement the notions that the operating come la higher on the stron cout Income statement. He is considering tacturing another 10.000 units up to the commy's capacity for manufacturing the coming year Hero that this will boost operating name and satisfy thema's were compilare though the state mares, sume that rests, un vestit e rice, and the sales is the same camaleos (4) that follow. If the news centro I, the income statement on the Absyption Satement and variabir Statement to complete the following table for the original production level. Then prepare similar income statements at a production level 10,000 units har and wat information to the table. Assume that totale costs, unit riable costs unit sales price, and the level on the same that production level Operating Income Original Production Original Production Additional 10,000 Additional 10,000 Level-Absorption Leval Variable Units-Absorption Units-Variable 2. Wat is the change in operating contro 10,000 addicionals under brition costing? ENVERSE 10,000 unts bigher and add that information to the table. Assume that total fixed costs, unit variable costs, unt sales price, and the sales teves are the same at both production levels Operating Income Original Production Original Production Additional 10,000 Additional 10,000 Level-Absorption Level-Variable Units-Absorption Units-Variable 2. What is the change in operating income from producing 10,000 adstional units under absorption conting? 3, what is the change in operating income from producing 10,000 national units under variatie conting? handing, storage, financing and obscence costs 4. What would be your recommendation to the production manager De mest produce tweeta 10,000 unts. The creme in operating income under absorption conting is due to fund manufacturing coats benighest in invertory, and the additional inventory will lead to higher b. Produce the extra 10,000 units Operating income will be increases, and the production manager will receive preise for creating higher protes c. Do not produce the extra 10,000 units Operating income does not change under absorption costing when the action units produced d. Produce the extra 10.000 units ways a good to move traits on hand keep the factory operating capacity, even if all the units are not sold Mastery Problem: Variable Costing for Management Analysis Absorption vs. Variable Operating income is one of the most important items toorted by a comoww. Drenang on the decision making reeds of management, desting om te ding option coating er variatie con Select where the following characteristics are most then with stron coming out Required under werely accepted accounting roles (GM) Oftes ved for internate in desion making Cost of goods manufactured includes only vacancturing costs Usein resorts prepared for external Fixed factory overhead couts are not part of cost of goods manufactured to fived and variable factory costs are che in cost od pods sold and intory Absorption Statement Atrezeption costing does not distinguen utween various and falls costa. As marcacturing costs and dead in the cost of goods said Saxon, Inc Absorption Costing Income Statement For the Year Ended December 31 Sales $275,000 Cost of goods sold: Cost of goods manufactured 100.000 Ending inventory (120.000 Total cost of goods sold 550.000 Gross proft 3595.000 Beling and administrative expenses (265.000) Operating income $309.000 Variable statement Under vorte couting, the cost of goods manufactured includes only variable manufacturing costs. This type of income statement includes a computation of manufacture marin, Saxon, Inc. Variable Costing Income Statement For the Year Ended December 31 Sales 51,275,000 Variable court of soldi Variable cost of goods manufactured $560,000 Ending investory (94.000) Total variable con of goods sold (476,000) Manufacturing magi $79.000 Vatte sing and administrative expenses (221,000) Contribution margin $575.000 Fed manufacturing costs 5240.000 Fixed sling and dive expenses $5,000 Tocat fed costs (105,000) Operating income $273.000 Method Comparison Review the income statements on the Absorption Statement and a statement, the complete the following table. The company's sales propertis 575and the number of units in enang inventory is 3,000. There was no beginning inventory Item Amount Numer of units sold Variables and administrative cost per unit Number of units manufactured Variable cost of goods manufactured per unit Pie manufacturing cost per unit Manufacturing Decisions Whenever the units manufactured differ from the sits sofished goods invertory is attectad, naring coating come, such cases and decreases could be interpreted as operator neces. Each cien min situations becretulvany citing whether to or vartotecting reporting would be more A consore controllable in the longest one with for a level of management, consecratie cuts or collect The production manager for Saxon, Inc. 1 wore because me com IN DIE Showing a high enough profit looking at the come statements on the Asion Statement and the verbe Statement the notions that the operating come la higher on the stron cout Income statement. He is considering tacturing another 10.000 units up to the commy's capacity for manufacturing the coming year Hero that this will boost operating name and satisfy thema's were compilare though the state mares, sume that rests, un vestit e rice, and the sales is the same camaleos (4) that follow. If the news centro I, the income statement on the Absyption Satement and variabir Statement to complete the following table for the original production level. Then prepare similar income statements at a production level 10,000 units har and wat information to the table. Assume that totale costs, unit riable costs unit sales price, and the level on the same that production level Operating Income Original Production Original Production Additional 10,000 Additional 10,000 Level-Absorption Leval Variable Units-Absorption Units-Variable 2. Wat is the change in operating contro 10,000 addicionals under brition costing? ENVERSE 10,000 unts bigher and add that information to the table. Assume that total fixed costs, unit variable costs, unt sales price, and the sales teves are the same at both production levels Operating Income Original Production Original Production Additional 10,000 Additional 10,000 Level-Absorption Level-Variable Units-Absorption Units-Variable 2. What is the change in operating income from producing 10,000 adstional units under absorption conting? 3, what is the change in operating income from producing 10,000 national units under variatie conting? handing, storage, financing and obscence costs 4. What would be your recommendation to the production manager De mest produce tweeta 10,000 unts. The creme in operating income under absorption conting is due to fund manufacturing coats benighest in invertory, and the additional inventory will lead to higher b. Produce the extra 10,000 units Operating income will be increases, and the production manager will receive preise for creating higher protes c. Do not produce the extra 10,000 units Operating income does not change under absorption costing when the action units produced d. Produce the extra 10.000 units ways a good to move traits on hand keep the factory operating capacity, even if all the units are not sold