QUESTION 13

ABC Co. manufactures and sells a single product and has provided the following information:

Unit Product Costs: Direct Material..............$31 Direct Labor....................26 Variable Mfg OH............10

Variable Selling and Admin Expenses............$7/unit Fixed Selling and Admin Expenses.................$5,200 Fixed Manufacturing Overhead........................$31,500

Unit Sales Price...........................$112 No units beginning inventory 1200 units producced 1000 units sold

Prepare a Variable Income Statement for ABC to determine the Net Operating Income or Loss

NOL is $1260

NOI is $1260

NOI is $1300

NOI is $2600

NOI is $3000

QUESTION 14

1. ABC Co. manufactures and sells a single product and has provided the following information:

   Unit Product Costs: Direct Material..............$31 Direct Labor....................26 Variable Mfg OH............10

   Variable Selling and Admin Expenses............$7/unit Fixed Selling and Admin Expenses.................$5,200 Fixed Manufacturing Overhead........................$31,500

   Unit Sales Price...........................$112 No units beginning inventory 1200 units producced 1000 units sold

   Prepare a Absorption Income Statement for ABC to determine the Net Operating Income or Loss

   NOL is $2600

   NOI is $2600

   NOI is $6550

   NOI is $7560

   NOI is $7650

   QUESTION 15

   1. When reconciling Net Operating Income or Loss between absorption and variable statements, to determine the difference,

      multiply fixed manufacturing overhead cost per unit produced x units sold.

      multiply the contribution margin ratio x ending inventory.

      look at the variable Cost of Goods Sold; that is the difference.

      subtract the Gross Margin from the Cost of Goods Sold and the absolute amount accounts for the difference.

      multiply the number of units in ending inventory x the fixed Mfg OH costs for each unit produced.

      QUESTION 16

      1. If lean production is the goal and just-in-time inventory is used

         		absorption costing net operating income will likely exceed variable costing net operating income.
         		variable costing net operating income will likely exceed absorption costing net operating income.
         		the net operating incomes of absorption and variable costing will equal or nearly equal.
         		business operations will be more efficient but there is no effect on the difference in the absorption or variable income statements.
         		net operating incomes will be decreased, regardless of the accounting method used.