MGMT 027
MGMT 027
value:
10.00 points
Maxwell Company manufactures and sells a single product. The following costs w ere incurred during the
company's first y ear of operations:
During the y ear. the company produced 20,000 units and sold 16,000 units. The selling price of the
company's product is $50 per unit.
Required:
1. Assume that the company uses absorption costing:
a. Compute the unit product cost. (Omit the " $" sign in your response.)
b. Prepare an income statement for the y ear. (Input all amounts as positive values except losses
which should be indicated by a minus sign. Omit the "$" sign in your response.)
a. Compute the unit product cost. (Omit the"$" sign in your response.)
3. The company 's controller believes that the company should have set last y ear's selling price at $51
instead of $50 per unit. She estimates the company could have sold 15,000 units at a price of $51 per
unit, thereby increasing the company's gross margin by $2,000 and its net operating income by $4,000.
a. Do y ou think the absorption costing approach is the proper w ay to assess the merits of the
proposed price increase?
O Yes
1!J N0
b. Do y ou think the v ariable costing approach is the proper w ay to assess the merits of the proposed
price inc rease?
1,!) Yes
O No
c. Using the variable costing approach, by how much will profits increase or dec rease if the price
increase in implemented?
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2. value:
10.00 points
CompuDesk, Inc., makes an oak desk specially designed for personal computers. The desk sells for
$200. Data for last y ear's operations follow:
Fixed costs:
Fixed manufac turing overhead $300,000
Fixed selling and administrativ e 450,000
Required :
1. Assume that the company uses v ariable costing. Comput e the unit product cost for one computer
desk. (Omit the " $" sign in your response.)
2. Assume that the company uses v ariable costing. Prepare a contribution format income statement for
the y ear. (Input all amounts as positive values except losses which should be indicated by a
minus sign. Om i t the " $" sign in your response.)
Break-ev en point I
9375 units
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3. value
10.00 points
Shastri Bicycle of Bombay, india, produces an inexpensive, y et ruggeifblcycle for use on the city's
crowded streets that it sells for 500 rupees. (Indian currency is denominated in rupees, denoted by ~.)
Selected data for the company's operations last year follow:
Required:
1. Assume that the company uses absorption costing. Compute the unit product cost for one bicycle.
(Omit the"'°' sign in your response.)
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· · · ·· · ·· · · {The following information applies to the questions displayed°f)e/Ow}· ·· ··········· ·················································· ······· ·· ·· ·· · · · ·
High Tension Transformers. Inc., manufac tures heavy-<luty transformers for elec trical sw itching stations.
The company uses variable costing for internal management reports and absorption costing for external
reports to shareholders, creditors, and the government. The c ompany has prov ided the following data:
The company's fixed manufacturing ovemead per unit was constant at $450 fOf all three years.
4. .we·
10.00 poi nts
Required:
1. Determine each year's absorption costing net operating income. (Amounts to be deducted should be
indicated with a minus sign . Omit the "$" si gn in your response.)
Reconciliation of Variable Costing and Absorption Costing Net Operating Incomes
Year 1 Year2 Year3
•
V ariable costing net operating income $L 2924.QQJ 269200 1 $1 251800 1
Add (deduct) fixed manufac turing overhead deferred in (released from) inv entory
under absorption costing C -13sooJ 4500 1 I 18000 1
5. value:
10.00 points
2. In Year 4, the company 's v ariable costing net operating. income ··;;;;,5···$240,200 and its absorption
costing net operating income was $267.200.
Decreased
• Increased
b. How much fixed manufacturing ovemead cost was deferred Of released from inventO<Y during Year
4? (Omit the " $" sign In your response.)
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6. value:
10.00 points
Amcor, Inc., incurs the follow ing costs to produce and sell a single product.
During the last y ear, 30,000 units w ere produced and 25,000 units w ere sold. The Finished Goods
inventory account at the end of the y ear shows a balance of $85,000 for the 5,000 unsold units.
Required:
1. Determine w hether the company is using absorption costing or v ariable costing to cost units in the
Finished Goods inventory account.
a. Calculate the ending balance in the Finished Goods inv entory account under v ariable costing and
absorption costing. (Omit the " $" sign in your response.)
Ending balance in Finished Good inv entory account under v ariable costing $ 85000
Ending balance in Finished Goods inventory under absorption costing $ 1---1-00-0--00-1
b. W hich costing method is the company using to cost units in the Finished Goods inventory account?
0 Absorption costing
@ Variable costing
2. Assume that the company w ishes to prepare financ ial statements for the y ear to issue to its
stockholders.
a. Is the $85,000 figure for Finished Goods inventory the correc t amount to use on these statements for
external reporting purposes?
Finished Goods inv entory balance for external reporting purposes $ ,_I_ _1_00_0_00_,I
check my work ~ eBook Link -. \flew Hint #1 @ references
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7. value:
10.00 points
·· ·· ·· ·· ·· Michaels Company segments its income statement · into its Easi arid WesiDivlSlons: The · company's
overall sales, contribution margin ratio, and net operating income are $600,000, 50%, and $50,000,
respectively. The West Division's contribution margin and contribution margin ratio are $150,000 and 75%,
respectively. The East Division's segment margin is $70,000. The company has $60,000 of common fixed
costs that cannot be traced to either division.
Required:
Prepare an income statement for Michaels Company that uses the contribution format and is segmented
by divisions. In addition, for the company as a whole and for each segment. show each item on the
segmented income statements as a pe<cent of sales. (lnput all amounts as positive values except
losses which should be indicated by a minus sign. Round your percentage answers to 1 decimal
place. Omit the"$" and "%"signs in your response.)
Divisions
Total Company East West
Amount % Amount % Amount %
f Sales • sl soooool 1001 $ 400000 1001 sl 2000001 1001
f Variable expenses • 3000001 50 I c 2500001 62.5 I I sooool 25 I
@£ntribution margin • 3000001 50 I [ 1sooci0] 37.5 I 1soooo I 75 I
f Traceablefixed expenses • 1900001 31.7 I [ 80000 1 20 1 11 0000 I 55 1
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[The following infonnation applies to the questions displayed below.]
Shastri Bicy cle of Bombay, India, produces an inexpensive, y et rugged, bicy cle for use on the city 's
crow ded streets that it sells for 500 rupees. (Indian currency is denominated in rupees, denoted by f. )
Selected data for the company 's operations last y ear follow:
The absorption costing income statement prepared by the company's accountant for last y ear appears
below:
Sales f 4,000,000
Cost of goods sold 2,960,000
8. value:
10.00 points
Required:
1. Detem1ine how much of the ending inventory consists of fixed manufacturing ov erhead cost deterred in
inventory to the next period. (Omit the "f" sign in your response.)
9. value:
10.00 points
:f Prepare an income siatemeni !Di ilie year lisin9 varia61e costinii: (ililJlii a1i ;;,:nc;11111s as llosfrive
values except losses which should be indicated by a minus sign. Omit the "f " sign in your
response.)
10. value:
10.00 points
Required:
1. Determine how much of the ending inventory consists of fixed manufacturing ov erhead cost deferred in
inv entory to the next period. (Omit the .., .. sign in your response.)
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11. 10.00 points value:
.............................................................................................................................................................................................................................................................................................................................................................................................................................
2. Prepare an income statement for the y ear using v ariable costing. (Input all amounts as positive
values except losses which should be indicated by a minus sign. Omit the "" " sign in your
response.)
12. value:
10.00 points
Required:
1. Determine how much of the ending inventory consists of fixed manufacturing overhead cost deferred in
inventory to the next period. (Omit the "" " sign in your response.)
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14. value:
10.00 points
CompuDesk, Inc., makes an oak desk spec ially designed for personal computers. The desk sells for
$200. Data for last y ear's operations follow:
Fixed costs:
Fixed manufacturing overhead $300,000
Fixed selling and administrative 450,000
Required :
1. Assume that the company uses variable costing . Compute the unit product cost for one computer
desk. (Omit the " $" sign in your response.)
2. Assume that the company uses v ariable costing. Prepare a contribution format income statement for
the y ear. (Input all amounts as positive values except losses which should be indicated by a
minus sign. Omit the " $" sign in your response.)
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• 14 0 outof140 pomts(10 0%)
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