Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Sunland Manufacturing produces basketballs used for indoor and outdoor games. The company has had significant troubles over the past few years, as the number of

Sunland Manufacturing produces basketballs used for indoor and outdoor games. The company has had significant troubles over the past few years, as the number of competitors in the basketball market has increased dramatically. Recently, the company was forced to cut back production in order to reduce its rising inventory level. The following is a list of costs for the company in 2022:

Variable costs per unit
   Rubber$2.75
   Other materials—indirect1.40
   Ball makers—direct labour5.60
   Factory electricity usage0.40
   Factory water usage0.15
   Other labour—indirect0.26
   Selling and administrative expenses0.40
Fixed costs per year
   Factory property taxes$128,325
   Factory sewer usage53,500
   Factory electricity usage42,800
   Selling and administrative expenses88,810


Sunland Manufacturing had an ending inventory of 90,950 basketballs in 2021. For these units, the fixed manufacturing overhead cost was $4.00 per unit and variable manufacturing costs were $9.60 per unit. In 2022, the company produced 37,500 basketballs, sold 77,600 basketballs, and had an ending inventory of 50,850 basketballs. The basketballs sold for $19.00 each. Sunland uses the FIFO method.

Calculate Sunland’ manufacturing cost per unit under absorption costing. (Round per unit calculations and final answer to 2 decimal places, e.g. 15.25.)

2021

2022

Manufacturing cost

$enter a dollar amount per unit rounded to 2 decimal places  per unit$enter a dollar amount per unit rounded to 2 decimal places  per unit

Prepare an absorption-costing income statement for 2022.

Sunland’ chief financial officer, Mr. Richard, is contemplating the benefits of using the absorption-costing and variable-costing approaches. He has asked you to perform a variety of tasks to help him analyze the differences between the two approaches:

1. Reconcile the differences between the income values of the two approaches.

Reconciliation of net income

Variable-costing net income

$enter a dollar amount

FMOH deferred in ending inventory

enter a dollar amount

FMOH released from beginning inventory

enter a dollar amount

Absorption-costing net income

$enter a total amount


2. Mr. Richard has heard that some basic managerial tasks can be better performed when variable costing is used. Calculate the break-even point in units for the company in 2022 using the variable-costing data. (Round answer to 0 decimal places, e.g. 5,275.)

Break-even pointenter the break-even point in units rounded to 0 decimal placesunits

Step by Step Solution

3.41 Rating (151 Votes )

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Practical financial management

Authors: William r. Lasher

5th Edition

0324422636, 978-0324422634

More Books

Students also viewed these General Management questions

Question

How is a standardized residual different from a residual?

Answered: 1 week ago