Required information

Chapter 7: Applying Excel

Step 1: Download the Applying Excel form located on the left-hand side, under files.

Step 2: Then enter formulas in all cells that contain question marks. For example, in cell B26 enter the formula "= B17".

Step 3: Check your worksheet by changing the units sold in the Data to 6,000 for Year 2. The cost of goods sold under absorption costing for Year 2 should now be $240,000. If it isnt, check cell C41. The formula in this cell should be =IF(C26

If your worksheet is operating properly, the net operating income under both absorption costing and variable costing should be $(34,000) for Year 2. That is, the loss in Year 2 is $34,000 under both methods. If you do not get these answers, find the errors in your worksheet and correct them. Assume that the units produced in year 2 were sold first.

Step 4: Proceed to the requirements below only after completing your worksheet as it will be used to answer the following questions.

The LIFO inventory flow assumption is used throughout the problem.

Chapter 7: Applying Excel: Exercise

2. Change all of the numbers in the data area of your worksheet so that it looks like this:

Data
Selling price per unit	$50
Manufacturing costs:
Variable per unit produced:
Direct materials	$11
Direct labor	$6
Variable manufacturing overhead	$3
Fixed manufacturing overhead per year	$120,000
Selling and administrative expenses:
Variable per unit sold	$4
Fixed per year	$70,000
	Year 1	Year 2
Units in beginning inventory	0
Units produced during the year	10,000	6,000
Units sold during the year	8,000	8,000
Enter a formula into each of the cells marked with a ? below
Review Problem 1: Contrasting Variable and Absorption Costing
Compute the Ending Inventory
	Year 1	Year 2
Units in beginning inventory	0	?
Units produced during the year	?	?
Units sold during the year	?	?
Units in ending inventory	?	?
Compute the Absorption Costing Unit Product Cost
	Year 1	Year 2
Direct materials	?	?
Direct labor	?	?
Variable manufacturing overhead	?	?
Fixed manufacturing overhead	?	?
Absorption costing unit product cost	?	?
Construct the Absorption Costing Income Statement
	Year 1	Year 2
Sales	?	?
Cost of goods sold	?	#VALUE!
Gross margin	?	?
Selling and administrative expenses	?	?
Net operating income	?	?
Compute the Variable Costing Unit Product Cost
	Year 1	Year 2
Direct materials	?	?
Direct labor	?	?
Variable manufacturing overhead	?	?
Variable costing unit product cost	?	?
Construct the Variable Costing Income Statement
	Year 1		Year 2
Sales		?		?
Variable expenses:
Variable cost of goods sold	?		?
Variable selling and administrative expenses	?	?	?	?
Contribution margin		?		?
Fixed expenses:
Fixed manufacturing overhead	?		?
Fixed selling and administrative expenses	?	?	?	?
Net operating income		?		?