ACCA 313 ABSORPTION AND VARIABLE COSTING PROBLEMS ONLY.doc

# ACCA 313 ABSORPTION AND VARIABLE COSTING PROBLEMS ONLY.doc...

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Use the following information for questions 1–3. The Crown Co. manufactures toasters. The company hired a cost accountant in its first year of operations, 2001, to explain to management how its costs behaved. After studying various documents and industry data, the cost accountant announced that the total SG&A expenses that the firm can expect to incur in any period is captured by the equation: Y = \$50,000 + \$10X, where Y is the total SG&A expense incurred and X is the number of units sold. Also, the accountant announced that the total product costs incurred in any period could be captured by the formula Y = \$100,000 + \$6X, where Y is the total manufacturing cost incurred and X is the number of units produced. In 2001, the firm produced 10,000 units and sold 9,000 of them at \$35 each. 1. According to the accountant’s equations, what would be the total of all costs incurred by the firm in 2001? 2. If the firm’s costs conformed exactly to the accountant’s equations, how much income before income taxes would be reported for 2001 if the firm uses absorption costing?

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• Fall '13
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