Homework Answers
| Operating income computed using variable costing will be lower |
| Under variable costing fixed manufacturing overhead is treated as a period cost and expensed in the period incurred. |
| However under absorption costing fixed manufacturing overhead is treated as a product cost and included in cost of inventory. |
| As a result, when inventories increase, fixed manufacturing overhead will be deferred in inventories and not expensed till product is sold resulting in higher operating income. |
| Option D is correct |
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Which of the following statements is true about the difference in operating income between variable costing...
Explain the difference between variable costing and absorption costing income statements. Provide income statements in both...
Explain the difference between variable costing and absorption costing income statements. Provide income statements in both variable costing and absorption costing formats for an initial period and its successive period in a case where all manufactured products within the two periods are sold by the end of the second period, but number of units sold in the first period is less than the number of units manufactured in this period. What is the interesting observation in comparing the two types...
1. Prepare operating income statements for both years based on variable costing. [The following information applies...
1. Prepare operating income statements for both years
based on variable costing.
[The following information applies to the questions displayed below.] Lehighton Chalk Company manufactures sidewalk chalk, which it sells online by the box at $23 per unit. Lehighton uses an actual costing system, which means that the actual costs of direct material, direct labor, and manufacturing overhead are entered into work-in-process inventory. The actual application rate for manufacturing overhead is computed each year; actual manufacturing overhead is divided by...
Yamaha Company reported operating income for Year 2 of $1,600,000 under variable costing and $1,200,000 under...
Yamaha Company reported operating income for Year 2 of $1,600,000 under variable costing and $1,200,000 under absorption costing. The total variable manufacturing cost of the company's beginning finished goods inventory was $120,000. The cost of the company's end-of-year finished goods inventory under standard absorption costing was $50,000 higher than the cost of the beginning-of-year finished goods inventory under variable costing. Required: a) Calculate the cost of ending finished goods inventory under absorption costing. b) Compare the operating incomes under absorption...
Consider the following comments about absorption- and variable-costing income statements: I. A variable-costing income statement discloses...
Consider the following comments about absorption- and variable-costing income statements: I. A variable-costing income statement discloses a firm's contribution margin. II. Cost of goods sold on an absorption-costing income statement includes fixed costs. III. The amount of variable selling and administrative cost is the same on absorption- and variable-costing income statements. Which of the above statements is (are) true? I only. II only. I and II. II and III. I, II, and III.
Q4. (25 marks) Yamaha Company reported operating income for Year 2 of $1,600,000 under variable costing...
Q4. (25 marks) Yamaha Company reported operating income for Year 2 of $1,600,000 under variable costing and $1,200,000 under absorption costing. The total variable manufacturing cost of the company's beginning finished goods inventory was $120,000. The cost of the company's end-of-year finished goods inventory under standard absorption costing was $50,000 higher than the cost of the beginning-of-year finished goods inventory under variable costing. Required: a) Calculate the cost of ending finished goods inventory under absorption costing b) Compare the operating...
Q4. (25 marks) Yamaha Company reported operating income for Year 2 of $1,600,000 under variable costing...
Q4. (25 marks) Yamaha Company reported operating income for Year 2 of $1,600,000 under variable costing and $1,200,000 under absorption costing. The total variable manufacturing cost of the company's beginning finished goods inventory was $120,000. The cost of the company's end-of-year finished goods inventory under standard absorption costing was $50,000 higher than the cost of the beginning-of-year finished goods inventory under variable costing. Required: a) Calculate the cost of ending finished goods inventory under absorption costing. b) Compare the operating...
Q4. (25 marks) Yamaha Company reported operating income for Year 2 of $1,600,000 under variable costing...
Q4. (25 marks) Yamaha Company reported operating income for Year 2 of $1,600,000 under variable costing and $1,200,000 under absorption costing. The total variable manufacturing cost of the company's beginning finished goods inventory was $120,000. The cost of the company's end-of-year finished goods inventory under standard absorption costing was $50,000 higher than the cost of the beginning-of-year finished goods inventory under variable costing. Required: a) Calculate the cost of ending finished goods inventory under absorption costing. b) Compare the operating...
Q4. (25 marks) Yamaha Company reported operating income for Year 2 of $1,600,000 under variable costing...
Q4. (25 marks) Yamaha Company reported operating income for Year 2 of $1,600,000 under variable costing and $1,200,000 under absorption costing. The total variable manufacturing cost of the company's beginning finished goods inventory was $120,000. The cost of the company's end-of-year finished goods inventory under standard absorption costing was $50,000 higher than the cost of the beginning-of-year finished goods inventory under variable costing. Required: a) Calculate the cost of ending finished goods inventory under absorption costing. b) Compare the operating...
Variable Costing Income Statement: Reconciliation
Whitman Company has just completed its first year of operations. The company's absorption costing income statement for the years below:Sales (35,000 units X $25 per unit)................................$875,000Cost of Goods Sold (35,000 units x $16 per unit)................$560,000Gross margin.........................................................$315,000Selling and administrative expenses..............................$280,000Net Operating Income................................................$35,000The company's selling and administrative expenses consist of $210,000 per year in fixed expenses and $2 per unit sold in variable expenses. The $16 per unit productcost given above is computed as follows:Direct Materials......................................................$5Direct Labor...........................................................6Variable manufacturing overhead..................................1Fixed manufacturing overhead ($160,000...
3. Reconcile the difference between variable costing and absorption costing net operating income in year 1...
3. Reconcile the difference between variable costing and absorption costing net operating income in year 1 and year 2. Year 1 Year 2 Variable costing net operating income (loss) Absorption costing net operating income (loss) $ 0 $ 0 Walsh Company manufactures and sells one product. The following information pertains to each of the company's first two years of operations: - 14 Variable costs per unit: Manufacturing: Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative Fixed costs...
1. Prepare operating income statements for both years
based on variable costing.
[The following information applies to the questions displayed below.] Lehighton Chalk Company manufactures sidewalk chalk, which it sells online by the box at $23 per unit. Lehighton uses an actual costing system, which means that the actual costs of direct material, direct labor, and manufacturing overhead are entered into work-in-process inventory. The actual application rate for manufacturing overhead is computed each year; actual manufacturing overhead is divided by...
Q4. (25 marks) Yamaha Company reported operating income for Year 2 of $1,600,000 under variable costing and $1,200,000 under absorption costing. The total variable manufacturing cost of the company's beginning finished goods inventory was $120,000. The cost of the company's end-of-year finished goods inventory under standard absorption costing was $50,000 higher than the cost of the beginning-of-year finished goods inventory under variable costing. Required: a) Calculate the cost of ending finished goods inventory under absorption costing b) Compare the operating...
Q4. (25 marks) Yamaha Company reported operating income for Year 2 of $1,600,000 under variable costing and $1,200,000 under absorption costing. The total variable manufacturing cost of the company's beginning finished goods inventory was $120,000. The cost of the company's end-of-year finished goods inventory under standard absorption costing was $50,000 higher than the cost of the beginning-of-year finished goods inventory under variable costing. Required: a) Calculate the cost of ending finished goods inventory under absorption costing. b) Compare the operating...
Q4. (25 marks) Yamaha Company reported operating income for Year 2 of $1,600,000 under variable costing and $1,200,000 under absorption costing. The total variable manufacturing cost of the company's beginning finished goods inventory was $120,000. The cost of the company's end-of-year finished goods inventory under standard absorption costing was $50,000 higher than the cost of the beginning-of-year finished goods inventory under variable costing. Required: a) Calculate the cost of ending finished goods inventory under absorption costing. b) Compare the operating...
3. Reconcile the difference between variable costing and absorption costing net operating income in year 1 and year 2. Year 1 Year 2 Variable costing net operating income (loss) Absorption costing net operating income (loss) $ 0 $ 0 Walsh Company manufactures and sells one product. The following information pertains to each of the company's first two years of operations: - 14 Variable costs per unit: Manufacturing: Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative Fixed costs...
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