263) Succulent Juice Corporation manufactures and sells premium tomato juice by the gallon.
Succulent just finished its first year of operations. The following data relates to this first year:
Number of gallons produced
75,000
Number of gallons sold
70,000
Selling price
$3.00 per gallon
Unit product cost under variable costing
$1.45 per gallon
Total contribution margin
$84,000
Total fixed manufacturing overhead cost
$63,000
Total fixed selling & administrative expense
$10,500
Required:
Using absorption costing, prepare Succulent Juice Corporation’s income statement for the year.
323
264) Nelter Corporation, which has only one product, has provided the following data
concerning its most recent month of operations:
Selling price
$
Units in beginning inventory
Units produced
Units sold
Units in ending inventory
Variable costs per unit:
Direct materials
$
Direct labor
$
Variable manufacturing overhead
$
Variable selling and administrative expense
$
Fixed costs:
Fixed manufacturing overhead
$
Fixed selling and administrative expense
$
The company produces the same number of units every month, although the sales in units vary
from month to month. The company’s variable costs per unit and total fixed costs have been
constant from month to month.
Required:
a. Prepare a contribution format income statement for the month using variable costing.
b. Prepare an income statement for the month using absorption costing.
265) Miller Corporation produces a single product. The company had the following results for its
first two years of operation:
Year 1
Year 2
Sales
$1,200,000
$1,200,000
Cost of goods sold
800,000
680,000
Gross margin
400,000
520,000
Selling and administrative expenses
300,000
300,000
Net operating income
$100,000
$220,000
In Year 1, the company produced and sold 40,000 units of its only product; in Year 2, the
company again sold 40,000 units, but increased production to 50,000 units. The company’s
variable production cost is $5 per unit and its fixed manufacturing overhead cost is $600,000 a
year. Fixed manufacturing overhead costs are applied to the product on the basis of each year’s
unit production (i.e., a new fixed manufacturing overhead rate is computed each year). Variable
selling and administrative expenses are $2 per unit sold.
Required:
a. Compute the unit product cost for each year under absorption costing and under variable
costing.
b. Prepare a contribution format income statement for each year using variable costing.
c. Reconcile the variable costing and absorption costing income figures for each year.
d. Explain why the net operating income for Year 2 under absorption costing was higher than the
net operating income for Year 1, although the same number of units were sold in each year.
Variable production cost
Fixed manufacturing overhead cost:
Unit product cost
Variable costing unit product cost
329
266) Borunda Corporation has provided the following data for its two most recent years of
operation:
Selling price per unit
$83
Manufacturing costs:
Variable manufacturing cost per unit produced:
Direct materials
$9
Direct labor
$7
Variable manufacturing overhead
$3
Fixed manufacturing overhead per year
$360,000
Selling and administrative expenses:
Variable selling and administrative expense per unit sold
$6
Fixed selling and administrative expense per year
$77,000
Year 1
Year 2
Units in beginning inventory
0
2,000
Units produced during the year
10,000
12,000
Units sold during the year
8,000
12,000
Units in ending inventory
2,000
2,000
Required:
a. Assume the company uses absorption costing. Prepare an income statement for each year.
b. Assume the company uses variable costing. Prepare an income statement for each year.
c. Prepare a report in good form reconciling the variable costing and absorption costing net
incomes.
333
267) Qadir Corporation, which has only one product, has provided the following data concerning
its most recent month of operations:
Selling price
$
Units in beginning inventory
Units produced
Units sold
Units in ending inventory
Variable costs per unit:
Direct materials
$
Direct labor
$
Variable manufacturing overhead
$
Variable selling and administrative expense
$
Fixed costs:
Fixed manufacturing overhead
$
Fixed selling and administrative expense
$
Required:
a. What is the unit product cost for the month under variable costing?
b. Prepare a contribution format income statement for the month using variable costing.
c. Without preparing an income statement, determine the absorption costing net operating
income for the month. (Hint: Use the reconciliation method.)
336
268) Fowler Corporation manufactures 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
3,000
Units produced
18,000
18,000
Units sold
15,000
20,000
Year 1
Year 2
Sales
$
240,000
$
320,000
Cost of goods sold
150,000
200,000
Gross margin
90,000
120,000
Selling and administrative expenses
80,000
90,000
Net operating income
$
10,000
$
30,000
Variable manufacturing costs are $6 per unit. Fixed manufacturing overhead totals $72,000 in
each year. This fixed manufacturing overhead is applied at the rate of $4 per unit. Variable
selling and administrative expenses are $2 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.
339
269) Sherwood Corporation has provided the following data for its two most recent years of
operation:
Selling price per unit
$61
Manufacturing costs:
Variable manufacturing cost per unit produced:
Direct materials
$13
Direct labor
$6
Variable manufacturing overhead
$4
Fixed manufacturing overhead per year
$96,000
Selling and administrative expenses:
Variable selling and administrative expense per unit sold
$5
Fixed selling and administrative expense per year
$65,000
Year 1
Year 2
Units in beginning inventory
0
2,000
Units produced during the year
8,000
6,000
Units sold during the year
6,000
5,000
Units in ending inventory
2,000
3,000
Required:
a. Assume the company uses absorption costing. Compute the unit product cost in each year.
b. Assume the company uses variable costing. Compute the unit product cost in each year.
c. Assume the company uses absorption costing. Prepare an income statement for each year.
d. Assume the company uses variable costing. Prepare an income statement for each year.
e. Prepare a report in good form reconciling the variable costing and absorption costing net
incomes.