Variable and Absorption Costing
Chandler Company sells its product for $116 per unit. Variable
manufacturing costs per unit are $51, and fixed manufacturing costs
at the normal operating level of 12,000 units are $240,000.
Variable selling expenses are $24 per unit sold. Fixed
administrative expenses total $104,000. Chandler had no beginning
inventory in 2016. During 2016, the company produced 12,000 units
and sold 9,000. Would net income for Chandler Company in 2016 be
higher if calculated using variable costing or using absorption
costing?
Calculate reported income using each method.
Do not use negative signs with any answers.
Absorption Costing Income Statement | |||||
---|---|---|---|---|---|
Sales | Answer | ||||
Cost of Goods Sold: | |||||
Beginning Inventory | Answer | ||||
Variable Costs | Answer | ||||
Fixed Costs | Answer | ||||
Less: Ending Inventory | Answer | ||||
Cost of Goods Sold | Answer | ||||
AnswerContribution marginGross profitLess: Ending inventoryManufacturing costSelling expenseVariable selling expense | Answer | ||||
AnswerContribution marginGross profitLess: Ending inventoryManufacturing costSelling expenseVariable selling expense | Answer | ||||
Administrative expense | Answer | ||||
Net Income | Answer |
Variable Costing Income Statement | |||||
---|---|---|---|---|---|
Sales | Answer | ||||
Cost of Goods Sold: | |||||
Beginning Inventory | Answer | ||||
Variable Costs | Answer | ||||
AnswerContribution marginGross profitLess: Ending inventoryManufacturing costSelling expenseVariable selling expense | Answer | ||||
Variable cost of goods sold | Answer | ||||
AnswerContribution marginGross profitLess: Ending inventoryManufacturing costSelling expenseVariable selling expense | Answer | ||||
AnswerContribution marginGross profitLess: Ending inventoryManufacturing costSelling expenseVariable selling expense | Answer | ||||
Fixed costs: | |||||
AnswerContribution marginGross profitLess: Ending inventoryManufacturing costSelling expenseVariable selling expense | Answer | ||||
Administrative Expense | Answer | ||||
Total Fixed Cost | Answer | ||||
Net Income | Answer |
Absorption Costing Income Statement | |||||||||
Units | Rate | Amount | Amount | ||||||
Sales | 9,000 | 116 | 1,044,000 | ||||||
Less : Cost of Goods Sold | |||||||||
Beginning Inventory | 0 | 0 | |||||||
Variable Costs | 12,000 | 51 | 612,000 | ||||||
Fixed Costs | 12,000 | 20 | 240,000 | ||||||
Less: Ending Inventory | 3,000 | 71 | 213,000 | ||||||
Cost of Goods Sold | 639,000 | ||||||||
Gross Profit | 405,000 | ||||||||
Less : Adminstration & Selling Cost | |||||||||
Administrative expense | 104,000 | ||||||||
Selling Expenses | 9,000 | 24 | 216,000 | ||||||
Net Income | 85,000 | ||||||||
Normal Operating Capacity ( In Units ) | 12,000 | ||||||||
Actual Production ( In Units ) | 12,000 | ||||||||
Absorption Rates | |||||||||
Fixed Manufacturing Absorbtion Rate | 20 | ( Fixed Cost / Normal Production ) | |||||||
Variable Manufacturing Absorbtion Rate | 51 | ( Given ) | |||||||
Total Manufacturing Cost per unit | 71 | ||||||||
Variable Costing Income Statement | |||||
Units | Rate | Amount | |||
Sales | 9,000 | 116 | 1,044,000 | ||
Less : Total Variable Cost | |||||
Manufacturing Cost | 9,000 | 51 | 459,000 | ||
Selling Cost | 9,000 | 24 | 216,000 | ||
675,000 | |||||
Contribution | 369,000 | ||||
Less : Fixed Cost | |||||
Manufacturing | 240,000 | ||||
Administrative | 104,000 | ||||
344,000 | |||||
Net Income | 25,000 | ||||
The Net Income is higher in Absorption Costing as the unsold production cost is carried forward to next period in the form of Ending Inventory.
Variable and Absorption Costing Chandler Company sells its product for $116 per unit. Variable manufacturing costs...
Variable and Absorption Costing Chandler Company sells its product for $120 per unit. Variable manufacturing costs per unit are $49, and fixed manufacturing costs at the normal operating level of 12,000 units are $240,000. Variable selling expenses are $21 per unit sold. Fixed administrative expenses total $104,000. Chandler had no beginning inventory in 2016. During 2016, the company produced 12,000 units and sold 9,000. Would net income for Chandler Company in 2016 be higher if calculated using variable costing or...
Variable and Absorption Costing Chandler Company sells its product for $116 per unit. Variable manufacturing costs per unit are 551 and fed manufacturing costs at the normal operating level of 12,000 units are $240,000. Variable selling expenses are $24 per unit sold. Fored administrative expenses total $104,000 Chandler had no beginning inventory in 2016 During 2016, the company produced 12.000 units and sold 9,000. Would net income for Chandler Company in 2016 be higher if calculated using variable costing or...
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Variable and Absorption Costing Chandler Company sells its product for $100 per unit. Variable manufacturing costs per unit are $40, and fixed manufacturing costs at the normal operating level of 12,000 units are $240,000. Variable selling expenses are $16 per unit sold. Fixed administrative expenses total $104,000. Chandler had no beginning inventory in 2016. During 2016, the company produced 12,000 units and sold 9,000. Would net income for Chandler Company in 2016 be higher if calculated using variable costing or...
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