6-479
6-481
218.
Hanks Corporation produces a single product. Operating data for the company and its
absorption costing income statements for the last two years are presented below:
Year
1
Year
2
Units in beginning
inventory
0
1,000
Units produced
9,000
9,000
Units sold
8,000
10,000
Year 1
Year 2
Sales
$80,000
$100,000
Cost of goods sold
48,000
60,000
Gross margin
32,000
40,000
Selling and
administrative
expenses
28,000
30,000
Net operating
income
$4,000
$10,000
Variable manufacturing costs are $4 per unit. Fixed manufacturing overhead was $18,000
in each year. This fixed manufacturing overhead was applied at a rate of $2 per unit.
Variable selling and administrative expenses were $1 per unit sold.
Required:
a. Compute the unit product cost in each year under variable costing.
b. Prepare new income statements for each year using variable costing.
c. Reconcile the absorption costing and variable costing net operating income for each
year.
6-483
6-484
219.
Breedon Corporation produces a single product. Data concerning the company’s
operations last year appear below:
Units in beginning inventory
0
Units produced
12,000
Units sold
11,250
Selling price per unit
$90
Variable costs per unit:
Direct materials
$20
Direct labor
$10
Variable manufacturing
overhead
$8
Variable selling and
administrative
$5
Fixed costs in total:
Fixed manufacturing
overhead
$180,000
Fixed selling and
administrative
$150,000
Required:
a. Compute the unit product cost under both absorption and variable costing.
b. Prepare an income statement for the year using absorption costing.
c. Prepare a contribution format income statement for the year using variable costing.
d. Prepare a report reconciling the difference in net operating income between absorption
and variable costing for the year.
a.
220.
Zimmerli Corporation manufactures a single product. The following data pertain to the
company’s operations over the last two years:
Variable costing net operating income, last year
$71,000
Variable costing net operating income, this year
$87,000
Fixed manufacturing overhead costs deferred in inventory under absorption costing, last
year
$22,000
Fixed manufacturing overhead costs released from inventory under absorption costing,
this year
$32,000
Variable costing net operating income
Absorption costing net operating income
Required:
a. Determine the absorption costing net operating income last year. Show your work!
b. Determine the absorption costing net operating income this year. Show your work!
6-488
221.
Last year, Hruska Corporation’s variable costing net operating income was $92,200 and
ending inventory decreased by 600 units. Fixed manufacturing overhead cost per unit was
$3 in both beginning and ending inventory.
Required:
Determine the absorption costing net operating income for last year. Show your work!
6-489
222.
Martz Corporation manufactures a single product. The following data pertain to the
company’s operations over the last two years:
Variable costing net operating income, last year
$85,500
Variable costing net operating income, this year
$105,400
Beginning inventory, last year
0 units
Ending inventory, last year
1,300 units
Ending inventory, this year
800 units
Fixed manufacturing overhead cost per unit both last year and this year
$4 per unit
Variable costing net operating income
Absorption costing net operating income
Required:
a. Determine the absorption costing net operating income for last year. Show your work!
b. Determine the absorption costing net operating income for this year. Show your work!
6-490
223.
Last year, Rochester Corporation’s variable costing net operating income was $78,000. The
fixed manufacturing overhead costs released from inventory under absorption costing
amounted to $39,000.
Required:
Determine the absorption costing net operating income last year. Show your work!
6-491
224.
Pen Corporation manufactures a single product. Last year, the company’s variable costing
net operating income was $55,700 and ending inventory increased by 800 units. Fixed
manufacturing overhead cost per unit was $3 in both beginning and ending inventory.
Required:
Determine the absorption costing net operating income for last year. Show your work!
6-492
225.
Mitchel Corporation manufactures a single product. Last year, variable costing net
operating income was $55,000. The fixed manufacturing overhead costs released from
inventory under absorption costing amounted to $24,000.
Required:
Determine the absorption costing net operating income last year. Show your work!
6-493
226.
Corporation Z has two divisions: A & B. The contribution margin for Division A is $188,600
and for Division B it is $196,500. Fixed expenses for Corporation Z are as follows:
Corporate managers’ salaries
$150,000
Division A manager’s salary
$56,000
Division B manager’s salary
$64,000
Maintenance-Division A
$9,000
Maintenance-Division B
$11,500
Office workers’ salaries-corporate
headquarters
$62,000
Corporate jet depreciation
$70,000
Contribution margin
Less traceable fixed expenses:
Division manager’s salary
Divisional maintenance
Divisional segment margin
Less common fixed expenses:
Corporate managers’ salaries
Corporate jet depreciation
Net operating income
Required:
Prepare a segmented income statement for this company that shows the divisional
segment margins and the company’s net operating income.
6-494
6-495
227.
Pratt Corporation has two major business segments-Apparel and Accessories. Data
concerning those segments for October appear below:
Sales revenues, Apparel
$130,000
Variable expenses, Apparel
$66,000
Traceable fixed expenses, Apparel
$17,000
Sales revenues, Accessories
$540,000
Variable expenses, Accessories
$270,000
Traceable fixed expenses, Accessories
$92,000
Sales
$130,000
Variable expenses
Contribution margin
Traceable fixed expenses
Segment margin
Common fixed expenses
Net operating income
Common fixed expenses totaled $153,000 and were allocated as follows: $73,000 to the
Apparel business segment and $80,000 to the Accessories business segment.