Managerial Accounting
15th Edition
ISBN: 9781337912020
Author: Carl Warren, Ph.d. Cma William B. Tayler
Publisher: South-Western College Pub
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Chapter 7, Problem 2CMA
Chassen Company, a cracker and cookie manufacturer, has the following unit costs for the month of June:
A total of 100,000 units were manufactured during June, of which 10,000 remain in ending inventory. Chassen uses the first-in, first-out (FIFO) inventory method, and the 10,000 units are the only finished goods inventory at June 30. Under the absorption costing concept, the value of Chassen’s June 30 finished goods inventory would be:
- a. $50,000.
- b. $70,000.
- c. $85,000.
- d. $145,000.
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Mario’s Foods produces frozen meals, which it sells for $8 each. The company uses the FIFO inventory costing method, and it computes a new monthly fixed manufacturing overhead rate based on the actual number of meals produced that month. All costs and production levels are exactly as planned. The following data are from the company’s first two months in business: (picture chart 1)
Compute the product cost per meal produced under absorption costing and under variable costing. Do this first for January and then for February.
Prepare separate monthly income statements for January and for February, using the following: a. Absorption costing b. Variable costing
Is operating income higher under absorption costing or variable costing in January? In February? Explain the pattern of differences in operating income based on absorption costing versus variable costing.
Feldspar, Inc. started the year with 200 units in the Finished Goods Inventory account. It produced 600 units during the year and sold 800 units. If Feldspar uses variable costing, ________.
A.
its operating income will be the same as under absorption costing
B.
its operating income for the period will be lower than under absorption costing
C.
its operating income for the period will be higher than under absorption costing
D.
its value of ending Finished Goods Inventory reported in the balance sheet will be higher than under absorption costing
On April 30, the end of the first month of operations, Joplin Company prepared the following income statement, based on the absorption costing concept:
Joplin CompanyAbsorption Costing Income StatementFor the Month Ended April 30
Sales (2,500 units)
$80,000
Cost of goods sold:
Cost of goods manufactured (2,900 units)
$66,700
Inventory, April 30 (400 units)
(9,200)
Total cost of goods sold
(57,500)
Gross profit
$22,500
Selling and administrative expenses
(13,520)
Operating income
$8,980
If the fixed manufacturing costs were $16,008 and the fixed selling and administrative expenses were $6,620, prepare an income statement according to the variable costing concept. Round all final answers to whole dollars.
Chapter 7 Solutions
Managerial Accounting
Ch. 7 - What types of costs are customarily included in...Ch. 7 - Which type of manufacturing cost (direct...Ch. 7 - Which of the following costs would be included in...Ch. 7 - In the variable costing income statement, how are...Ch. 7 - Prob. 5DQCh. 7 - Prob. 6DQCh. 7 - Discuss how financial data prepared on the basis...Ch. 7 - Prob. 8DQCh. 7 - Explain why rewarding sales personnel on the basis...Ch. 7 - Explain why service companies use different...
Ch. 7 - Variable costing Marley Company has the following...Ch. 7 - Prob. 2BECh. 7 - Variable costingsales exceed production The...Ch. 7 - Prob. 4BECh. 7 - Contribution margin by segment The following...Ch. 7 - At the end of the first year of operations, 21,500...Ch. 7 - Gallatin County Motors Inc. assembles and sells...Ch. 7 - Fresno Industries Inc. manufactures and sells...Ch. 7 - On March 31, the end of the first month of...Ch. 7 - On April 30, the end of the first month of...Ch. 7 - On October 31, the end of the first month of...Ch. 7 - The following data were adapted from a recent...Ch. 7 - Estimated income statements, using absorption and...Ch. 7 - The following data were adapted from a recent...Ch. 7 - Prob. 10ECh. 7 - Explain why service companies use different...Ch. 7 - Galaxy Sports Inc. manufactures and sells two...Ch. 7 - Prob. 13ECh. 7 - Sales territory and salesperson profitability...Ch. 7 - Prob. 15ECh. 7 - Prob. 16ECh. 7 - Variable costing income statement for a service...Ch. 7 - Variable costing income statement for a service...Ch. 7 - Prob. 1PACh. 7 - The demand for solvent, one of numerous products...Ch. 7 - During the first month of operations ended May 31,...Ch. 7 - Salespersons report and analysis Walthman...Ch. 7 - Segment variable costing income statement and...Ch. 7 - Absorption and variable costing income statements...Ch. 7 - Income statements under absorption costing and...Ch. 7 - Absorption and variable costing income statements...Ch. 7 - Prob. 4PBCh. 7 - Variable costing income statement and effect on...Ch. 7 - Prob. 1MADCh. 7 - Prob. 2MADCh. 7 - Prob. 3MADCh. 7 - Segment disclosure by Apple Inc. (AAPL) provides...Ch. 7 - Prob. 1TIFCh. 7 - Inventory effects under absorption costing BendOR,...Ch. 7 - Communication Bon Jager Inc. manufactures and...Ch. 7 - Prob. 1CMACh. 7 - Chassen Company, a cracker and cookie...Ch. 7 - Prob. 3CMACh. 7 - Bethany Company has just completed the first month...
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