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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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