Absorption costing and other costing methods make it possible to accurately report operating income and costs....
- Absorption costing and other costing methods make it possible to accurately report operating income and costs. Develop and explain an argument either for or against the use of absorption costing in a manufacturing, service and retail companies?
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Homework Answers
1) a) Use of absorption costing in manufacturing companies:
- Absorption costing indicates that all the manufacturing costs have been assigned to the units produced. Absorption costing is required for external financial reporting.
- Manufacturing companies that use absorption costing allocate all the costs to production. The term "absorption costing " means all the costs are absorbed by the company's products.
- It takes into account all the costs of production including both variable and fixed costs.
- It is a managerial accounting method for capturing all the costs with manufacturing.
b) Use of absorption costing in service companies:
- Total absorption costing is a method of accounting costs which entails the full cost of providing a service.
- Benefits obtained by various departments from that overheads can be measured and can be apportioned on that basis.
- Absorption costing is a method required for a company to be in compliance with generally accepted accounting principles.
- The cost of each cost center can be either direct or indirect.
c) Use of absorption costing in retail companies:
- It helps the retail companies in calculating the cost included in the ending inventory which is carried over as an asset into next period in the balance sheet.
- When absorption costing is used in the retail companies it allocates fixed overhead costs to a product whether or not it was sold in that period.
- When it is used in the retail companies it helps in improving profits over the period.
- It assigns the retailers in accumulating the costs of different products.
Add Answer to:
Absorption costing and other costing methods make it
possible to accurately report operating income and costs....
find net operating income (loss) for year 1 under absorption costing find net operating income (loss)...
find net operating income (loss) for year 1 under absorption
costing
find net operating income (loss) for year 2 under absorption
costing
find net operating income (loss) for year 1 under variable
costing
find net operating income (loss) for year 2 under variable
costing
area of your worksheet so that it А B с Chapter 6: Applying Excel Data $ 344 $ 146 Selling price per unit Manufacturing costs: Variable per unit produced: Direct materials Direct labor Variable manufacturing overhead...
(e) The net operating income (loss) under absorption costing is less than the net operating income...
(e)
The net operating income (loss) under absorption costing is less
than the net operating income (loss) under variable costing in Year
2 because (Select all that apply.):
3.
Make a note of the absorption costing net operating income
(loss) in Year 2.
At the end of Year 1, the company’s board of directors set a
target for Year 2 of net operating income of $70,000 under
absorption costing. If this target is met, a hefty bonus would...
(e) The net operating income (loss) under absorption costing is less than the net operating income...
(e) The net operating income (loss) under absorption costing is
less than the net operating income (loss) under variable costing in
Year 2 because: (You may select more than one answer.
Single-click the box with the question mark to produce a checkmark
for a correct answer and double click the box with the question
mark to empty the box for a wrong answer. Any boxes left with a
question mark will be automatically graded as
incorrect.)
Units were left over...
: Different costing methods provide companies with different options for categorizing and calculating costs. Managers and...
: Different costing methods provide companies with different options for categorizing and calculating costs. Managers and cost accountants should understand the differences between costing methods so that they can choose and properly implement the method that best suits their needs for decision making. For this short paper, you will compare the characteristics of job costing and process costing methods and give examples of when and why each might be used. You will also address the use and benefits of costing...
Analyzing Income under Absorption and Variable Costing Variable manufacturing costs are $123 per unit, and fixed...
Analyzing Income under Absorption and Variable Costing Variable manufacturing costs are $123 per unit, and fixed manufacturing costs are $110,500. Sales are estimated to be 5,200 units. If an amount is zero, enter "0". Round Intermediate calculations to the nearest cent and your final answers to the nearest dollar. a. How much would absorption costing operating income differ between a plan to produce 5,200 units and a plan to produce 6,500 units? b. How much would variable costing operating income...
Calculator Absorption Statement Absorption costing does not distinguish between variable and fixed costs. All manufacturing costs...
Calculator Absorption Statement Absorption costing does not distinguish between variable and fixed costs. All manufacturing costs are included in the cost of goods sold. Saxon, Inc. Absorption Costing Income Statement For the Year Ended December 31 Sales $1,280,000 $840,000 (168,000) Cost of goods sold: Cost of goods manufactured Ending inventory Total cost of goods sold Gross profit Selling and administrative expenses Operating income (672,000) $608,000 (305,000) $303,000 Variable Statement Under variable costing, the cost of goods manufactured includes only variable...
During Heaton Company's first two years of operations, it reported absorption costing net operating income as...
During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Sales (e $63 per unit) Cost of goods sold ( 540 per unit) Gross margin Selling and administrative expenses Net operating income Year 1 $1,071,000 680,000 391.000 301.000 $ 190,0001 Year 2 $1,701,000 1,080,000 621,000 331,000 $ 290,000 ances *$3 per unit variable: $250,000 fixed each year. The company's $40 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing...
Last year, Jaquet Corporation's variable costing net operating income was $58,000. The fixed manufacturing overhead costs...
Last year, Jaquet Corporation's variable costing net operating income was $58,000. The fixed manufacturing overhead costs deferred in inventory under absorption costing amounted to $9,000. Required: Determine the absorption costing net operating income last year. Show your work!
Absorption and Variable Costing Income Statements for Two Months and Analysis During the first month of...
Absorption and Variable Costing Income Statements for Two Months and Analysis During the first month of operations ended July 31, Head Gear Inc. manufactured 6,400 hats, of which 5,200 were sold. Operating data for the month are summarized as follows: Sales $104,000 Manufacturing costs: Direct materials $47,360 Direct labor 22,400 Variable manufacturing cost 12,160 Fixed manufacturing cost 15,360 97,280 Selling and administrative expenses: Variable $10,920 Fixed 5,200 16,120 During August, Head Gear Inc. manufactured 4,000 hats and sold 5,200 hats....
CO During Heaton Company's first two years of operations, it reported absorption costing net operating income...
CO During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Sales (@ $63 per unit) Cost of goods sold ($33 per unit) Gross margin Selling and administrative expenses Net operating income Year 1 $ 1,197,000 627,000 570,000 303,000 $ 267,000 Year 2 $1,827,000 957,000 870,000 333,000 $ 537,000 * $3 per unit variable: $246,000 fixed each year, The company's $33 unit product cost is computed as follows: Direct materials Direct labor Variable...
find net operating income (loss) for year 1 under absorption
costing
find net operating income (loss) for year 2 under absorption
costing
find net operating income (loss) for year 1 under variable
costing
find net operating income (loss) for year 2 under variable
costing
area of your worksheet so that it А B с Chapter 6: Applying Excel Data $ 344 $ 146 Selling price per unit Manufacturing costs: Variable per unit produced: Direct materials Direct labor Variable manufacturing overhead...
(e)
The net operating income (loss) under absorption costing is less
than the net operating income (loss) under variable costing in Year
2 because (Select all that apply.):
3.
Make a note of the absorption costing net operating income
(loss) in Year 2.
At the end of Year 1, the company’s board of directors set a
target for Year 2 of net operating income of $70,000 under
absorption costing. If this target is met, a hefty bonus would...
(e) The net operating income (loss) under absorption costing is
less than the net operating income (loss) under variable costing in
Year 2 because: (You may select more than one answer.
Single-click the box with the question mark to produce a checkmark
for a correct answer and double click the box with the question
mark to empty the box for a wrong answer. Any boxes left with a
question mark will be automatically graded as
incorrect.)
Units were left over...
Analyzing Income under Absorption and Variable Costing Variable manufacturing costs are $123 per unit, and fixed manufacturing costs are $110,500. Sales are estimated to be 5,200 units. If an amount is zero, enter "0". Round Intermediate calculations to the nearest cent and your final answers to the nearest dollar. a. How much would absorption costing operating income differ between a plan to produce 5,200 units and a plan to produce 6,500 units? b. How much would variable costing operating income...
Calculator Absorption Statement Absorption costing does not distinguish between variable and fixed costs. All manufacturing costs are included in the cost of goods sold. Saxon, Inc. Absorption Costing Income Statement For the Year Ended December 31 Sales $1,280,000 $840,000 (168,000) Cost of goods sold: Cost of goods manufactured Ending inventory Total cost of goods sold Gross profit Selling and administrative expenses Operating income (672,000) $608,000 (305,000) $303,000 Variable Statement Under variable costing, the cost of goods manufactured includes only variable...
During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Sales (e $63 per unit) Cost of goods sold ( 540 per unit) Gross margin Selling and administrative expenses Net operating income Year 1 $1,071,000 680,000 391.000 301.000 $ 190,0001 Year 2 $1,701,000 1,080,000 621,000 331,000 $ 290,000 ances *$3 per unit variable: $250,000 fixed each year. The company's $40 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing...
CO During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Sales (@ $63 per unit) Cost of goods sold ($33 per unit) Gross margin Selling and administrative expenses Net operating income Year 1 $ 1,197,000 627,000 570,000 303,000 $ 267,000 Year 2 $1,827,000 957,000 870,000 333,000 $ 537,000 * $3 per unit variable: $246,000 fixed each year, The company's $33 unit product cost is computed as follows: Direct materials Direct labor Variable...
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