Chapter 20(5): Variable Costing for Management Analysis
136.
Philadelphia Company has the following information for March:
Sales
$450,000
Variable cost of goods sold
240,000
Fixed manufacturing costs
70,000
Variable selling and administrative expenses
52,000
Fixed selling and administrative expenses
35,000
Determine the March (a) manufacturing margin, (b) contribution margin, and (c) income from operations for
Philadelphia Company.
137.
Tony’s Company has the following information for March:
Sales
$1,000,000
Variable cost of goods sold
490,000
Fixed manufacturing costs
170,000
Variable selling and administrative expenses
112,000
Fixed selling and administrative expenses
100,000
Determine the March (a) manufacturing margin, (b) contribution margin, and (c) income from operations for
Tony’s
Company.
138.
On January 1 of the current year, Townsend Co. commenced operations. It operated its plant at 100% of capacity
during January. The following data summarized the results for January:
Units
Production
50,000
Sales ($18 per unit)
42,000
Inventory, January 31
8,000
Manufacturing costs:
Variable
$575,000
Fixed
80,000
Total
$655,000
Selling and administrative expenses:
Variable
$ 35,000
Fixed
10,500
Total
$ 45,500
(a)
Prepare an income statement using absorption costing.
(b)
Prepare an income statement using variable costing.
Chapter 20(5): Variable Costing for Management Analysis
139.
On October 31, the end of the first month of operations, Morristown & Co. prepared the following
income
statement based on absorption costing:
Morristown & Co.
Absorption Costing Income Statement
For Month Ended October 31, 20-
Sales (2,600 units)
$117,000
Cost of goods sold:
Cost of goods manufactured
$85,500
Less ending inventory (400 units)
11,400
Cost of goods sold
74,100
Gross profit
$ 42,900
Selling and administrative expenses
21,500
Income from operations
$ 21,400
If the fixed manufacturing costs were $42,900 and the variable selling and administrative expenses were $14,600,
prepare an income statement using variable costing.
140.
Fixed costs are $10 per unit and variable costs are $25 per unit. Production was 13,000 units, while sales were
12,000 units. Determine (a) whether variable costing income from operations is less than or greater than
absorption
costing income from operations, and (b) the difference in variable costing and absorption costing
income from
operations.
141.
Fixed costs are $50 per unit and variable costs are $125 per unit. Production was 130,000 units, while sales were
125,000 units. Determine (a) whether variable costing income from operations is less than or greater than
absorption costing income from operations, and (b) the difference in variable costing and absorption costing
income
from operations.
142.
At EOM Inc., the beginning inventory is 20,000 units. All of the units manufactured during the period and
16,000
units of the beginning inventory were sold. The beginning inventory fixed costs are $50 per unit, and
variable costs
are $300 per unit. Determine (a) whether variable costing income from operations is less than or
greater than
absorption costing income from operations, and (b) the difference in variable costing and absorption
income from
operations.
143.
The beginning inventory is 5,000 units. All of the units manufactured during the period and 3,000 units of the
beginning inventory were sold. The beginning inventory fixed costs are $25 per unit, and variable costs are $55
per
unit. Determine (a) whether variable costing income from operations is less than or greater than absorption
costing
income from operations, and (b) the difference in variable costing and absorption income from
operations.
144.
Presented below are the major categories or captions that would appear on an income statement prepared in the
variable costing format:
Contribution margin
Fixed costs
Income from operations
Manufacturing margin
Sales
Variable cost of goods sold
Variable selling and administrative expenses
(a)
Arrange the above captions in the proper order in accordance with the variable
costing concept.
(b)
Which of the captions represents (1) the difference between sales and the total of
all the variable costs and expenses and (2) the remaining amount of revenue
available for fixed manufacturing costs, fixed expenses, and net income?
145.
At XLT Inc., variable costs are $80 per unit, and fixed costs are $40,000. Sales are estimated to be 4,000 units. (a)
How much would absorption costing income from operations differ between a plan to produce 8,000 units and a
plan to produce 10,000 units? (b) How much would variable costing income from operations differ between the
two
production plans?
146.
If variable manufacturing costs are $15 per unit and total fixed manufacturing costs are $200,000, what is
the
manufacturing cost per unit if:
(a)
20,000 units are manufactured and the company uses the variable costing concept?
(b)
25,000 units are manufactured and the company uses the variable costing concept?
(c)
20,000 units are manufactured and the company uses the absorption costing concept?
(d)
25,000 units are manufactured and the company used the absorption costing concept?
147.
During the first year of operations, 18,000 units were manufactured and 13,500 units were sold. On
August
31, Olympic Inc. prepared the following income statement based on the variable costing concept:
Olympic Inc.
Variable Costing Income Statement
For Year Ended August 31, 20—
Sales
$297,000
Variable cost of goods sold:
Variable cost of goods manufactured
$288,000
Less ending inventory
72,000
Variable cost of goods sold
216,000
Manufacturing margin
$ 81,000
Variable selling and administrative expenses
40,500
Contribution margin
$ 40,500
Fixed costs:
Fixed manufacturing costs
$ 12,000
Fixed selling and administrative expenses
10,800
22,800
Income from operations
$ 17,700
Determine the unit cost of goods manufactured, based on (a) the variable costing concept and (b) the absorption
costing concept.
148.
Gyro Company manufactures Products T and W and is operating at full capacity. To manufacture Product W
requires three times the number of machine hours required for Product T. Market research indicates that 1,000
additional units of Product W could be sold. The contribution margin by unit of product is as follows:
Product T
Product W
Sales price
$300
$325
Variable cost of goods sold
235
250
Manufacturing margin
$ 65
$ 75
Variable selling and administrative expenses
25
10
Contribution margin
$ 40
$ 65
Calculate the increase or decrease in total contribution margin if 1,000 additional units of Product W are
produced
and sold.
149.
The following data are for Trendy Fashion Apparel:
North
South
Sales volume (units):
Blouses
5,000
5,000
Skirts
4,000
8,000
Sales price per unit:
Blouses
$20.00
$22.00
Skirts
$18.00
$20.00
Variable cost per unit
Blouses
$ 7.00
$ 9.00
Skirts
$ 9.00
$11.00
Determine the contribution margin for (a) Skirts and (b) the South Region.
150.
The Excelsior Company has three salespersons. Average sales price per unit sold, average variable manufacturing
costs per unit, and number of units sold for each salesperson are shown below.
Commissions are earned according to the following schedule:
Total Sales
$0 to 49,999
Percentage
6%
$50,000 to $52,999
7%
Over $53,000
8%
Salesperson
Avg. selling price per unit
Mary Q.
$50.00
John A.
$65.00
Susan B.
$45.00
Avg. var. mfg. costs per unit
25.00
30.00
35.00
Number of units sold
1,000
750
1,200
Prepare a contribution by salesperson report.
151.
The actual price for a product was $50 per unit, while the planned price was $44 per unit. The volume increased
by
4,000 to 60,000 total units. Determine (a) the quantity factor and (b) the price factor for sales.
152.
Based upon the following data taken from the records of Bruce Inc., prepare a contribution margin analysis
report
for the year ended December 31.
For Year Ended
December 31
Actual
Planned
Difference
Increase
(Decrease)
Sales
$312,000
$325,000
$(13,000)
Less:
Variable cost of goods sold
$169,200
$182,000
$(12,800)
Variable selling and administrative
expenses
32,400
39,000
(6,600)
Total
$201,600
$221,000
$(19,400)
Contribution margin
$110,400
$104,000
$ 6,400
Number of units sold
120,000
130,000
(10,000)
Per unit:
Sales price
$2.60
$2.50
0.10
Variable cost of goods sold
1.41
1.40
0.01
Variable selling and administrative
expenses
0.27
0.30
(0.03)
Chapter 20(5): Variable Costing for Management Analysis
Chapter 20(5): Variable Costing for Management Analysis
153.
Treats fixed selling cost as a period cost.
154.
Required by generally accepted accounting principles.
155.
Treats fixed manufacturing cost as a period cost.
156.
Operating income is impacted by changes in inventory level.
157.
Generally provides the most useful report for controlling costs.
158.
Generally provides the most useful report for setting long-term prices.
159.
May be used in a manufacturing company.
160.
Includes gross profit on the income statement.