Exam 9: Income Effects of Denominator Level on Inventory Valuation

Megredy Company prepared the following absorption costing income statement for the year ended May 31, 2012. Additional information follows: Selling and administrative expenses include $1.50 of variable cost per unit sold. There was no beginning inventory, and 17,500 units were produced. Variable manufacturing costs were $11 per unit. Actual fixed costs were equal to budgeted fixed costs. Prepare a variable-costing income statement for the same period.

One possible means of determining the difference between absorption and variable costing based operating incomes is

Use the information below to answer the following question(s). Balloon Arrangements produces balloon bouquets. The following information has been provided by management: -Which denominator level is required by Canada Revenue Agency for income tax reporting?

Answer the following question(s) using the information below. Reusser Company produces wood statues. Management has provided the following information: -What is the cost per statue if throughput costing is used?

Ace Products sells its products for $22 each. Unit manufacturing costs are: direct materials, $4.00; direct manufacturing labour, $6.00; and variable manufacturing overhead, $3.00. Total fixed manufacturing overhead costs are $60,000 and marketing expenses are $2.00 per unit plus $20,000 per year. The current production level is 25,000 units although only 20,000 units are anticipated to be sold. 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.

Longview Golf Company sells a special putter for $20 each. In March it sold 28,000 putters while manufacturing 30,000. There was no beginning inventory on March 1. Production information for March was: Required: a. Compute the cost per unit under both absorption and variable costing. b. Compute the ending inventories under both absorption and variable costing. c. Compute operating income under both absorption and variable costing.

Answer the following question(s) using the information below. Peggy's Pillows produces and sells a decorative pillow for $75.00 per unit. In the first month of operation, 2,000 units were produced and 1,750 units were sold. Actual fixed costs are the same as the amount budgeted for the month. Other information for the month includes: -The following information pertains to Brian Stone Corporation: What is the difference between operating incomes under absorption costing and variable costing?

Many companies using absorption costing do not make any distinction between variable and fixed costs in their accounting system.

Practical capacity is based on which of the following assumptions?

The downward demand spiral for a company is the continuing reduction in the demand for its products that occurs when prices of competitors' products are not met and higher unit costs result in more reluctance to meet competitors' prices.

"Super-variable costing" assumes that

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. -The production-volume variance is

Answer the following question(s) using the information below. The following information pertains to the Bean Company: -What is the absorption costing break-even point in units?

Answer the following question(s) using the information below. The following information pertains to the Bean Company: -What are break-even sales in units using absorption costing if the production units are actually 25,000?