Exam 9: Income Effects of Denominator Level on Inventory Valuation

Answer the following question(s)using the information below.Heinrich Corporation budgeted fixed manufacturing costs of $6,000 during 2012.Other information for 2012 includes: The company uses absorption costing and the fixed manufacturing cost rate is based on the budgeted denominator level.Manufacturing variances are closed to cost of goods sold. -Fixed manufacturing costs expensed on the income statement (excluding adjustments for variances)total

Wallace's Wrench Company manufactures socket wrenches.For next month the vice-president of production plans on producing 4,400 wrenches per day.The company can produce as many as 5,000 wrenches per day, but are more likely to produce 4,500 per day.The demand for wrenches for the next three years is expected to average 4,250 wrenches per day.Fixed manufacturing costs per month total $336,600.The company works 20 days a month due to local zoning restrictions.Fixed manufacturing overhead is charged on a per wrench basis.Required: a.What is the theoretical fixed manufacturing overhead rate per wrench? b.What is the practical fixed manufacturing overhead rate per wrench? c.What is the normal fixed manufacturing overhead rate per wrench? d.What is the master-budget fixed manufacturing overhead rate per wrench?

Use the information below to answer the following question(s).Beauty Supply Company manufactures shampoo.The supervisor has provided the following information and stated that standard costing is used for manufacturing, marketing, and administrative costs. There were no beginning or ending inventories of materials or work-in-process. -What is the per unit variable cost?

Bruster Company sells its products for $66 each.The current production level is 25,000 units, although only 20,000 units are anticipated to be sold.Unit manufacturing costs are: Required: a.Prepare an income statement using absorption costing in the gross margin format. b.Prepare an income statement using variable costing in the contribution margin format.

Helton Company has the following information for the current year: What is the difference between operating incomes under absorption costing and variable costing?

One of the biggest reasons variable costing is controversial involves

Use the information below to answer the following question(s).Balloon Arrangements produces balloon bouquets.The following information has been provided by management: -Which of the following criteria should be used to evaluate management according to critics of absorption costing?

Use the information below to answer the following question(s).Urban Body Products Ltd.manufactures body wash liquid soap.The controller has provided the following information and stated that standard costing is used for manufacturing, marketing, and administrative costs. There were no beginning or ending inventories of materials or work-in-process. -What would Urban Body Products Ltd.operating income (loss)be for January and February, respectively, using the absorption costing approach?

Another common term used by some companies for variable costing is direct costing.

Practical capacity is based on which of the following assumptions?

Both theoretical and practical capacity measure capacity in terms of demand for the output.

Use the information below to answer the following question(s).Western Technologies Inc.produces dashboard displays.Actual fixed manufacturing overhead is the same as the budgeted amount, $687,500.Production in September increased by 10% over the previous month's production.August production was 25,000 displays.The production level is the same as the budgeted denominator level.At the end of September, 2,000 displays remained in stock.In August, all of the displays were sold by the end of the month and there was no remaining work in process inventory. -What is the Western Technologies' September cost of goods sold amount if absorption costing is used?

For the current year, Nichols Inc., had sales of 75,000 units and production of 100,000 units.Other information for the year included: There was no beginning inventory.Required: a.Compute the ending finished goods inventory under both absorption and variable costing. b.Compute the cost of goods sold under both absorption and variable costing.

The following information pertains to XYZ Corporation: What is the difference between absorption costing operating income and variable costing operating income?

Absorption-costing income statements cannot easily differentiate between variable and fixed costs.

For the current year, Bonnet Inc., had sales of 42,000 units and production of 50,000 units.Other information for the year included: There was no beginning inventory.Required: a.Compute the ending finished goods inventory under both absorption and variable costing. b.Compute the cost of goods sold under both absorption and variable costing.

The following information pertains to Brian Stone Corporation: What is the difference between operating incomes under absorption costing and variable costing?

Use the information below to answer the following question(s).Beauty Supply Company manufactures shampoo.The supervisor has provided the following information and stated that standard costing is used for manufacturing, marketing, and administrative costs. There were no beginning or ending inventories of materials or work-in-process. -What would Beauty Supply Company's operating income (loss)be for January and February, respectively, using the absorption costing approach?

Calvin Enterprises produces a specialty statue item.The following information has been provided by management: Required: a.What is the cost per statue if absorption costing is used? b.What is the cost per statue if throughput costing is used? c.What is the total throughput contribution?

Use the information below to answer the following question(s).Honda Heaven produces and sells an auto part for $20.00 per unit.Direct materials are $8 per unit, while direct manufacturing labour averages $1.50 per unit.Variable manufacturing overhead is $0.50 per unit and fixed manufacturing overhead is $250,000 per year.Administrative expenses, all fixed, run $90,000 per year, with sales commissions of $2 per part.Production is 100,000 parts per year.And this year, 75,000 boxes were sold. -Absorption costing is also known as