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

CHAPTER 9
INVENTORY COSTING AND CAPACITY ANALYSIS
9-23 (40 min.) Variable and absorption costing, explaining operating-income
differences.
1. Key inputs for income statement computations are:
January February March
Beginning inventory
Production
Goods available for sale
Units sold
Ending inventory
0
1 ,500
1,500
1 ,350
150
150
1 ,400
1,550
1 ,400
150
150
1 ,520
1,670
1 ,530
140
The budgeted fixed manufacturing cost per unit and budgeted total manufacturing cost
per unit under absorption costing are:
January February March
(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
$525,000
1,500
$350
$1,000
$1,350
$525,000
1,500
$350
$1,000
$1,350
$525,000
1,500
$350
$1,000
$1,350
9-1

(a) Variable Costing
January 2020 February 2020 March 2020
Revenues
a
$4,455,000 $4,620,000 $5,049,000
Variable costs
Beginning inventory
b
$ 0 $ 150,000 $ 150,000
Variable manufacturing costs
c
1 ,500,000 1 ,400,000 1 ,520,000
Cost of goods available for sale
Deduct ending inventory
d
1,500,000
(150,000)
1,550,000
(150 ,000)
1,670,000
(140 ,000)
Variable cost of goods sold
Variable operating costs
e
Total variable costs
1,350,000
1 ,080,000
2 ,430,000
1,400,000
1 ,120,000
2 ,520,000
1,530,000
1,224 ,000
2 ,754,000
Contribution margin
Fixed costs
Fixed manufacturing costs
Fixed operating costs
Total fixed costs
Operating income
525,000
130 ,000
2,025,000
655 ,000
$1 ,370,000
525,000
130 ,000
2,100,000
655 ,000
$1 ,445,000
525,000
130 ,000
2,295,000
655 ,000
$1 ,640,000
a
$3,300 × 1,350; $3,300 × 1,400; $3,300 × 1,530
b
$? × 0; $1,000 × 150; $1,000 × 150
c
$1,000 × 1,500; $1,000 × 1,400; $1,000 × 1,520
d
$1,000 × 150; $1,000 × 150; $1,000 × 140
e
$800 × 1,350; $800 × 1,400; $800 × 1,530
9-2

(b) Absorption Costing
January 2020 February 2020 March 2020
Revenues
a
Cost of goods sold
Beginning inventory
b
$ 0
$4,455,000
$ 202,500
$4,620,000
$ 202,500
$5,049,000
Variable manufacturing costs
c
1,500,000 1,400,000 1,520,000
Allocated fixed manufacturing
costs
d
525 ,000 490 ,000 532 ,000
Cost of goods available for sale 2,025,000 2,092,500 2,254,500
Deduct ending inventory
e
(202,500) (202,500) (189,000)
Adjustment for prod. vol. var.
f
0 35 ,000 U (7 ,000) F
Cost of goods sold 1,822,500 1 ,925,000 2 ,058,500
Gross margin 2,632,500 2,695,000 2,990,500
Operating costs
Variable operating costs
g
1,080,000 1,120,000 1,224,000
Fixed operating costs 130 ,000 130 ,000 130 ,000
Total operating costs 1 ,210,000 1,250,000 1 ,354,000
Operating income $1 ,422,500 $1 ,445,000 $1 ,636,500
a
$3,300 × 1,350; $3,300 × 1,400; $3,300 × 1,530
b $? × 0; $1,350 × 150; $1,350 × 150
c $1,000 × 1,500; $1,000 × 1,400; $1,000 × 1,520
d $350 × 1,500; $350 × 1,400; $350 × 1,520
e $1,350 × 150; $1,350 × 150; $1,350 × 140
f
$525,000 – $525,000; $525,000 – $490,000; $525,000 – $532,000
g $800 × 1,350; $800 × 1,400; $800 × 1,530
9-3

2.