Q Chapter 20 Variable Costing for Manag Problem Absorption Costing Income Statement Sales (60,000 x $30) .. . $1,800,000 Cost of goods sold: Beginning inventory (10,000 x $26) .... . .-- $ 260,000 Cost of goods manufactured (50,000 x $27) 1,350,000 Total cost of goods sold .... 1,610,000 Gross profit ........... $ 190,000 Selling and administrative expenses ($65,000 + $45,000) 110,000 Income from operations 80,000 Variable Costing Income Statement Sales (60,000 x $30) .. . . .. . $1,800,000 Variable cost of goods sold: Beginning inventory (10,000 x $24) . $ 240,000 Variable cost of goods manufactured (50,000 x $25)...... . ..- 1,250,000 Total variable cost of goods sold .. .. 1,490,000 Manufacturing margin. .... $ 310,000 Variable selling and administrative expenses ... 65,000 Contribution margin...... $ 245,000 Fixed costs: Fixed manufacturing costs. .. $ 100,000 Fixed selling and administrative expenses. ... 45,000 Total fixed costs. . 145,000 Income from operations . 100,000 3. The difference of $20,000 ($100,000 - $80,000) in the amount of income from operations is attributable to the different treatment of the fixed manufacturing costs. The beginning inventory in the absorption costing income statement includes $20,000 (10,000 units x $2) of fixed manufacturing costs incurred in the preceding period. This $20,000 was included as an expense in a variable costing income statement of a prior period. Therefore, none 1028 W O ENGQ Chapter 20 Variable Costing for Manag Problem Absorption Costing Income Statement Sales (60,000 x $30) .. . $1,800,000 Cost of goods sold: Beginning inventory (10,000 x $26) .... . .-- $ 260,000 Cost of goods manufactured (50,000 x $27) 1,350,000 Total cost of goods sold .... 1,610,000 Gross profit ........... $ 190,000 Selling and administrative expenses ($65,000 + $45,000) 110,000 Income from operations 80,000 Variable Costing Income Statement Sales (60,000 x $30) .. . . .. . $1,800,000 Variable cost of goods sold: Beginning inventory (10,000 x $24) . $ 240,000 Variable cost of goods manufactured (50,000 x $25)...... . ..- 1,250,000 Total variable cost of goods sold .. .. 1,490,000 Manufacturing margin. .... $ 310,000 Variable selling and administrative expenses ... 65,000 Contribution margin...... $ 245,000 Fixed costs: Fixed manufacturing costs. .. $ 100,000 Fixed selling and administrative expenses. ... 45,000 Total fixed costs. . 145,000 Income from operations . 100,000 3. The difference of $20,000 ($100,000 - $80,000) in the amount of income from operations is attributable to the different treatment of the fixed manufacturing costs. The beginning inventory in the absorption costing income statement includes $20,000 (10,000 units x $2) of fixed manufacturing costs incurred in the preceding period. This $20,000 was included as an expense in a variable costing income statement of a prior period. Therefore, none 1028 W O ENG81337515498/pageid/1062 G Q Chapter 20 Variable Costing for Manager 1029 5. Since all costs of operating a business are control- . Discuss the two factors affecting both sales and lable, what is the significance of the term noncon- variable costs to which a change in contribution trollable cost margin can be attributed. 6. Discuss how financial data prepared on the basis 10. How is the quantity factor for an increase or a of variable costing can assist management in the decrease in the amount of sales computed in using development of short-run pricing policies. contribution margin analysis? 7. Why might management analyze product profitability? Explain why service companies use different activity 8. Explain why rewarding sales personnel on the basis bases than manufacturing companies to classify of total sales might not be in the best interests of a costs as fixed or variable. business whose goal is to maximize profits. Basic Exercises BE 20-1 Variable costing obj. 1 Marley Company has the following information for March: Sales $912,000 Variable cost of goods sold 474,000 Fixed manufacturing costs 82,000 Variable selling and administrative expense 238.100 Fixed selling and administrative expenses 54,700 Determine (A) the manufacturing margin, (B) the contribution margin, and (C) income from operations for Marley Company for the month of March BE 20-2 Variable costing-production exceeds sales Obj. 1 Fixed manufacturing costs are $44 per unit, and variable manufacturing costs are $100 per SHOW ME HOW unit. Production was 67,200 units, while sales were 50,400 units. Determine (A) whether vari- able costing income from operations is less than or greater than absorption costing income from operations, and (B) the difference in variable costing and absorption costing income from operations K 1029 W ENG498/pageid/1062 G Q AA Marley Company has the following information for March: SHOW ME HOW Sales $912,000 Variable cost of goods sold 474,000 Fixed manufacturing costs 82,000 Variable selling and administrative expenses 238,100 Fixed selling and administrative expenses 54,700 Determine (A) the manufacturing margin, (B) the contribution margin, and (C) income from operations for Marley Company for the month of March. BE 20-2 Variable costing-production exceeds sales Obj. 1 Fixed manufacturing costs are $44 per unit, and variable manufacturing costs are $100 per SHOW ME HOW unit. Production was 67,200 units, while sales were 50,400 units. Determine (A) whether vari- able costing income from operations is less than or greater than absorption costing income from operations, and (B) the difference in variable costing and absorption costing income from operations. BE 20-3 Variable costing-sales exceed production obj. 1 The beginning inventory is 52,800 units. All of the units that were manufactured during the SHOW ME HOW period and 52,800 units of the beginning inventory were sold. The beginning inventory fixed manufacturing costs are $14.70 per unit, and variable manufacturing costs are $30 per unit. Determine (A) whether variable costing income from operations is less than or greater than absorption costing income from operations, and (B) the difference in variable costing and ab- sorption costing income from operations. BE 20-4 Analyzing income under absorption and variable costing Obj. 2 Variable manufacturing costs are $126 per unit, and fixed manufacturing costs are $157,500. Sales are estimated to be 10,000 units. A. How much would absorption costing income from operations differ between produce 10,000 units and a plan to produce 15,000 units? B. How much would variable costing income from operations differ b tion plans? 1029 / 1498/pageid/1062 G Q AA Marley Company has the following information for March: SHOW ME HOW Sales $912,000 Variable cost of goods sold 474,000 Fixed manufacturing costs 82,000 Variable selling and administrative expenses 238,100 Fixed selling and administrative expenses 54,700 Determine (A) the manufacturing margin, (B) the contribution margin, and (C) income from operations for Marley Company for the month of March. BE 20-2 Variable costing-production exceeds sales Obj. 1 Fixed manufacturing costs are $44 per unit, and variable manufacturing costs are $100 per SHOW ME HOW unit. Production was 67,200 units, while sales were 50,400 units. Determine (A) whether vari- able costing income from operations is less than or greater than absorption costing income from operations, and (B) the difference in variable costing and absorption costing income from operations. BE 20-3 Variable costing-sales exceed production obj. 1 The beginning inventory is 52,800 units. All of the units that were manufactured during the SHOW ME HOW period and 52,800 units of the beginning inventory were sold. The beginning inventory fixed manufacturing costs are $14.70 per unit, and variable manufacturing costs are $30 per unit. Determine (A) whether variable costing income from operations is less than or greater than absorption costing income from operations, and (B) the difference in variable costing and ab- sorption costing income from operations. BE 20-4 Analyzing income under absorption and variable costing Obj. 2 Variable manufacturing costs are $126 per unit, and fixed manufacturing costs are $157,500. Sales are estimated to be 10,000 units. A. How much would absorption costing income from operations differ between produce 10,000 units and a plan to produce 15,000 units? B. How much would variable costing income from operations differ b tion plans? 1029 / 181337515498/pageid/1062 G Q AA Basic Exercises BE 20-1 Variable costing Obj- 1 Marley Company has the following information for March: SHOW ME HOW Sales $912,000 Variable cost of goods sold 474,000 Fixed manufacturing costs 82,000 Variable selling and administrative expenses 238,100 Fixed selling and administrative expenses 54,700 Determine (A) the manufacturing margin, (B) the contribution margin, and (C) income from operations for Marley Company for the month of March. BE 20-2 Variable costing-production exceeds sa Obj. 1 Fixed manufacturing costs are $44 per unit, and variable manufacturing costs are $100 per SHOW ME HOW unit. Production was 67,200 units, while sales were 50.400 units. Determine (A) whether vari- able costing income from operations is less than or greater than absorption costing income from operations, and (B) the difference in variable costing and absorption costing income from operations. BE 20-3 Variable costing-sales exceed production Obj. 1 The beginning inventory is 52,800 units. All of the units that were manufactured during the SHOW ME HOW period and 52,800 units of the beginning inventory were sold. The beginning inventory fixed manufacturing costs are $14.70 per unit, and variable manufacturing costs are $30 per unit. Determine (A) whether variable costing income from operations is less than or greater than absorption costing income from operations, and (B) the difference in variable costing and ab- sorption costing income from operations. BE 20-4 Analyzing income under absorption and variable costing obj. 2 Variable manufacturing costs are $126 per unit, and fixed manufacturing costs are $157,500. WOW ME HOW Sales are estimated to be 10,000 units. A. How much would absorption costing income from operations differ between a plan to produce 10,000 units and a plan to produce 15,000 units? 1029 / 134 Co 12:52 ENG 6/8/20 DELL81337515498/pageid/1062 G Q AA Basic Exercises BE 20-1 Variable costing Obj- 1 Marley Company has the following information for March: SHOW ME HOW Sales $912,000 Variable cost of goods sold 474,000 Fixed manufacturing costs 82,000 Variable selling and administrative expenses 238,100 Fixed selling and administrative expenses 54,700 Determine (A) the manufacturing margin, (B) the contribution margin, and (C) income from operations for Marley Company for the month of March. BE 20-2 Variable costing-production exceeds sa Obj. 1 Fixed manufacturing costs are $44 per unit, and variable manufacturing costs are $100 per SHOW ME HOW unit. Production was 67,200 units, while sales were 50.400 units. Determine (A) whether vari- able costing income from operations is less than or greater than absorption costing income from operations, and (B) the difference in variable costing and absorption costing income from operations. BE 20-3 Variable costing-sales exceed production Obj. 1 The beginning inventory is 52,800 units. All of the units that were manufactured during the SHOW ME HOW period and 52,800 units of the beginning inventory were sold. The beginning inventory fixed manufacturing costs are $14.70 per unit, and variable manufacturing costs are $30 per unit. Determine (A) whether variable costing income from operations is less than or greater than absorption costing income from operations, and (B) the difference in variable costing and ab- sorption costing income from operations. BE 20-4 Analyzing income under absorption and variable costing obj. 2 Variable manufacturing costs are $126 per unit, and fixed manufacturing costs are $157,500. WOW ME HOW Sales are estimated to be 10,000 units. A. How much would absorption costing income from operations differ between a plan to produce 10,000 units and a plan to produce 15,000 units? 1029 / 134 Co 12:52 ENG 6/8/20 DELL