# CHAPTER 9 Inventory Costing and Capacity Analysis.docx -...

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CHAPTER 9INVENTORY COSTING AND CAPACITY ANALYSIS9-23(40 min.)Variable and absorption costing, explaining operating-incomedifferences.1.Key inputs for income statement computations are:JanuaryFebruaryMarchBeginning inventoryProductionGoods available for saleUnits soldEnding inventory01,5001,5001,3501501501,4001,5501,4001501501,5201,6701,530140The budgeted fixed manufacturing cost per unit and budgeted total manufacturing costper unit under absorption costing are:JanuaryFebruaryMarch(a)Budgeted fixed manufacturing costs(b)Budgeted production(c)=(a)÷(b)Budgeted fixed manufacturing cost per unit(d)Budgeted variable manufacturing cost per unit(e)=(c)+(d)Budgeted total manufacturing cost per unit\$525,0001,500\$350\$1,000\$1,350\$525,0001,500\$350\$1,000\$1,350\$525,0001,500\$350\$1,000\$1,3509-1
(a)Variable CostingJanuary 2020February 2020March 2020Revenuesa\$4,455,000\$4,620,000\$5,049,000Variable costsBeginning inventoryb\$0\$150,000\$150,000Variable manufacturing costsc1,500,0001,400,0001,520,000Cost of goods available for saleDeduct ending inventoryd1,500,000(150,000)1,550,000(150,000)1,670,000(140,000)Variable cost of goods soldVariable operating costseTotal variable costs1,350,0001,080,0002,430,0001,400,0001,120,0002,520,0001,530,0001,224,0002,754,000Contribution marginFixed costsFixed manufacturing costsFixed operating costsTotal fixed costsOperating income525,000130,0002,025,000655,000\$1,370,000525,000130,0002,100,000655,000\$1,445,000525,000130,0002,295,000655,000\$1,640,000a\$3,300 × 1,350; \$3,300 × 1,400; \$3,300 × 1,530b\$? × 0; \$1,000 × 150; \$1,000 × 150c\$1,000 × 1,500; \$1,000 × 1,400; \$1,000 × 1,520d\$1,000 × 150; \$1,000 × 150; \$1,000 × 140e\$800 × 1,350; \$800 × 1,400; \$800 × 1,5309-2
(b)Absorption CostingJanuary 2020February 2020March 2020RevenuesaCost of goods soldBeginning inventoryb\$0\$4,455,000\$202,500\$4,620,000\$202,500\$5,049,000Variable manufacturing costsc1,500,0001,400,0001,520,000Allocated fixed manufacturingcostsd525,000490,000532,000Cost of goods available for sale2,025,0002,092,5002,254,500Deduct ending inventorye(202,500)(202,500)(189,000)Adjustment for prod. vol. var.f035,000U(7,000)FCost of goods sold1,822,5001,925,0002,058,500Gross margin2,632,5002,695,0002,990,500Operating costsVariable operating costsg1,080,0001,120,0001,224,000Fixed operating costs130,000130,000130,000Total operating costs1,210,0001,250,0001,354,000Operating income\$1,422,500\$1,445,000\$1,636,500a\$3,300 × 1,350; \$3,300 × 1,400; \$3,300 × 1,530b\$? × 0; \$1,350 × 150; \$1,350 × 150c\$1,000 × 1,500; \$1,000 × 1,400; \$1,000 × 1,520d\$350 × 1,500; \$350 × 1,400; \$350 × 1,520e\$1,350 × 150; \$1,350 × 150; \$1,350 × 140f\$525,000 – \$525,000; \$525,000 – \$490,000; \$525,000 – \$532,000g\$800 × 1,350; \$800 × 1,400; \$800 × 1,5309-3
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