A) What is the net operating income (loss) in Year 2 under absorption costing?
B) At the end of Year 1, the company’s board of directors set a target for Year 2 of net operating income of $20,000 under absorption costing. If this target is met, a hefty bonus would be paid to the CEO of the company. Keeping everything else the same from above, change the units produced in Year 2 to 4,400 units.
What is the net operating income (loss) in Year 2 under absorption costing?
A) | Unit cost: | ||||||
Year 1 | Year 2 | ||||||
Direct materials | 153 | 153 | |||||
Direct labor | 55 | 55 | |||||
Variable manufacturing overhead | 37 | 37 | |||||
Fixed manufacturing overhead | 44 | 50 | |||||
(Based on units produced) | (110000/2500) | (110000/2200) | |||||
Total | 289 | 295 | |||||
$ | $ | ||||||
Sales | (2300*309) | 710700 | |||||
(Units sold*Selling price per unit) | |||||||
Cost of goods sold: | |||||||
Inventory,Jan 1,Year 2 | (200*289) | 57800 | |||||
(Inventory in units*Unit cost for year 1) | |||||||
Variable cost of goods manufactured | (2200*295) | 649000 | |||||
(Units produced*Unit cost for year 2) | |||||||
Less:Inventory,Dec 31,Year 2 | (100*295) | 29500 | 677300 | ||||
(Inventory in units*Unit cost for year 2) | |||||||
Gross margin | 33400 | ||||||
Less:Selling and administrative expenses | |||||||
Variable | (2300*9) | 20700 | |||||
(units sold*variable per unit) | |||||||
Fixed | 47000 | ||||||
Total selling and administrative expenses | 67700 | ||||||
Operating income/(loss) | -34300 | ||||||
Inventory in units as on Jan 1,Year 2=Units in beginning inventory+Units produced-Units sold=0+2500-2300=200 units | |||||||
Inventory in units as on Dec 31,Year 2=Units in beginning inventory+Units produced-Units sold=200+2200-2300=100 units | |||||||
B) | Unit cost: | ||||||
Year 1 | Year 2 | ||||||
Direct materials | 153 | 153 | |||||
Direct labor | 55 | 55 | |||||
Variable manufacturing overhead | 37 | 37 | |||||
Fixed manufacturing overhead | 44 | 25 | |||||
(Based on units produced) | (110000/2500) | (110000/4400) | |||||
Total | 289 | 270 |
A) What is the net operating income (loss) in Year 2 under absorption costing? B) At...
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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...
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During Heaton Company's first two years of operations, the company reported absorption costing net operating income as follows: $ Sales (@ $60 per unit) Cost of goods sold (@ $39 per unit) Gross margin Selling and administrative expenses* Net operating income Year 1 $1,020,000 663,000 357,000 299,000 $ 58,000 Year 2 1,620,000 1,053,000 567,000 329,000 $ 238,000 *$3 per unit variable; $248,000 fixed each year. The company's $39 unit product cost is computed as follows: $ Direct materials Direct labor...
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During Heaton Company's first two years of operations, the company reported absorption costing net operating income as follows: Sales (@ $61 per unit) Cost of goods sold (@ $39 per unit) Year 1 945,500 604,500 Year 2 $ 1,555,500 9 94,500 Gross margin Selling and administrative expenses 341,099, 288,304 561.000 318,300 Net operating income $ 52,700 $ 242,700 * $3 per unit variable; $241,800 fixed each year, The company's $39 unit product cost is computed Direct materials Direct labor Variable...
During Heaton Company's first two years of operations, the company reported absorption costing net operating income as follows: Sales (@ $63 per unit) Cost of goods sold (@ $39 per unit) Gross margin Selling and administrative expenses Net operating income Year 1 $1,071,000 663,000 408,000 305,000 $ 103,000 Year 2 $ 1,701,000 1,053,000 648,000 335,000 $ 313,000 * $3 per unit variable; $254,000 fixed each year. The company's $39 unit product cost is computed as follows: Direct materials Direct labor...