Required information [The following information applies to the questions displayed below.] Suppose there are three passengers sharing a single cab ride and that passenger A's usual fare to his destination would be $32, passenger B's usual fare to her destination would be $18, and passenger C's fare would be $50: Because they are sharing the cab, and assuming no surcharge, the total cab fare is $50, rather than the $100 they would have had to pay in total individually: So there is a $50 saving to sharing the cab. Required: 1: Assume the passengers decide to split the $50 savings based on the relative proportion of how much each passenger would have paid individually ifthey had not shared the cab. How much will each passenger pay? Passenger A: Passenger B: Passenger C: 2: Assume, instead, that the passengers decide to split the cab fare so that each passenger saves the same absolute amount of money: How much will each passenger pay? Passenger A: Passenger B: Passenger 0: Kate's Kale Chips produces a healthy snack made primarily of kale. Each bag of the product sells for $5. The company computes the manufacturing overhead rate on a quarterly basis based upon the planned number of units to be produced that quarter. The following data are from the projections of Kate's Kale Chips for the upcoming quarter: Projections Sales 26,000 bags Production 28,000 bags Variable manufacturing cost per bag $ 3.20 Sales and distribution costs per bag $ 0.25 Total fixed manufacturing overhead 3; 42,000 Fixed administrative overhead 3; 24,000 Required: 1. Compute the projected product cost per bag produced under full costing. 2. Compute the projected product cost per bag under variable costing. (Round your answers to 2 decimal places.) Product cost under full costing $ s 2. Product cost under variable costing Mark Hancock Incorporated manufactures a specialized surgical instrument called the HAN20. The rm has grown rapidly in recent years because of the product's low price and high quality. However, sales have declined this year primarily due to increased competition and a decrease in the surgical procedures for which the HAN2O is used' The rm is concerned about the decline in sales and has hired a consultant to analyze the rm's protability' The consultant was provided the following information: 2021 2022 Sales (units) 3,800 3,400 Production 4,240 2,920 Budgeted production and sales 4,600 4,000 Beginning inventory 800 1,240 Data per unit (all variable) Price $ 2,095 $ 1,995 Direct materials and labor 1,200 1,200 Selling costs 125 125 Fixed costs Manufacturing overhead $ 805,000 $ 700,000 Selling and administrative 120,000 120,000 Top management at Hancock explained to the consultant that a difficult business environment for the firm in 2021 and 2022 had caused the firm to reduce its price and production levels and reduce its fixed manufacturing costs in response to the decline in sales. Even with the price reduction, there was a decline in sales in both years. This led to an increase in inventory in 2021, which the rm was able to reduce in 2022 by further reducing the level of production. In both years, Hancock's actual production was less than the budgeted level so that the overhead rate for fixed overhead, calculated from budgeted production levels, was too low, and a production volume variance was calculated to adjust cost of goods sold for the underapplied xed overhead (the calculation of the production volume variance is explained fully in Chapter 15 and reviewed briefly below). The production volume variance for 2021 was determined from the xed overhead rate of $175 per unit ($805,000/4,600 budgeted units), Because the actual production level was 360 units short ofthe budgeted level in 2021 (4,600 4,240), the amount ofthe production volume variance in 2021 was 360 X $175 = $63,000. The production volume variance is underapplied because the actual production level is less than budgeted, and the production volume variance is therefore added back to cost of goods sold to determine the amount of cost of goods sold in the full costing income statement. The full costng income statement for 2021 is shown below: Sales 7,961,000 Cost of goods sold: Beginning inventory $ 1,100,000 Cost of goods produced 5,830,000 Cost of goods available for sale $ 6,930,000 Less ending inventory 1,705,000 Cost of goods sold: $ 5,225,000 Plus unfavorable production volume variance 63,000 Adjusted cost of goods sold $ 5,288,000 Gross margin $ 2,673,000 Less selling and administrative costs Variable $ 475,000 Fixed 120,000 595,000 Operating income $ 2,078,000 Requhed: 1, Using the full costing method, prepare the income statement for 2022, 2-a. Using variable costing, prepare an income statement for each period. 2b. Prepare a reconciliation of the difference each year in the operating income resulting from the full and variablecosting methods. Complete this question by entering your answers in the tabs below. Req 1 Req 2A Req ZB Using the full costing method, prepare the income statement for 2022. Beginning inventory $ 1,705,000 _ Cost of goods produced 3,869,000 Ending inventory Cost of goods available for sale Less: Fixed manufacturing costs Cost of goods sold Adjusted cost of goods sold Gross margin Less: Selling and administrative costs _ operatingmcome _ Complete this question by entering your answers in the tabs below. Req 1 Req 2A Req 2B Using variable costing, prepare an income statement for each period. MARK HANCOCK, INCORPORATED Variable Costing Income Statement 2021 2022 Cost of goods sold Cost of goods available for sale Cost of goods sold Contribution margin Less: Selling and administrative costs Operating income Complete this question by entering your answers in the tabs below. Req 1 Req 2A Req 2B Prepare a reconciliation of the difference each year in the operating income resulting from the full- and variable-costing methods. (Negative amounts should be indicated by a minus sign.) MARK HANCOCK, INCORPORATED Reconciling Difference in Net Income Between Absoprtion and Variable Costing 2021 2022 Change in inventory in units Multiply times fixed overhead rate Difference in net income $ 0 $ 0