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PROBLEM TWO By applying a variety of cost accounting methods to the operating data of a given year, the controller of a manufacturing company prepares
PROBLEM TWO By applying a variety of cost accounting methods to the operating data of a given year, the controller of a manufacturing company prepares the following alternative income statements Sales Cost of goods sold Variances $1,000,000$1,000,000$1,000,000$1,000,000 $395,000 $420,000 $250,000 $375,000 Direct mat Direct labor Manufac 15,000 5,000 15,000 5,000 25,000 350,000 $770,000 $230,000 overhead 25,000 350,000 $770,000 $230,000 Other costs (all fixed 350,000 $770,000 $230,000 475,000 $745,000 $255,000 erating income REQUIRED 1. The controller used the following costing methods: (a) actual costing, (b) normal costing, (c) standard absorption costing, and (d) standard variable costing. Match each of these methods with the appropriate income statement, A, B, C, or D above, and explain the basis of your selection. During the year, did inventory quantities increase, decrease, or remain the same? Explain. During the year, was the level of production higher than, lower than, or equal to the company's denominator level of volume? Explain. During the year, was the variable manufacturing overhead incurred more than, less than, or equal to the budget? Explain. 2. 3. 4
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