tutorial-solution-week.8

tutorial-solution-week.8 - 9-18(40 min)Variable versus...

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Unformatted text preview: 9-18(40 min)Variable versus absorption costing.1.Income Statement for the Zwatch Company, Variable Costingfor the Year Ended December 31, 2007Revenues: $22 × 345,400$7,598,800Variable costsBeginning inventory: $5.10 × 85,000$ 433,500Variable manufacturing costs: $5.10 × 294,9001,503,990Cost of goods available for sale1,937,490Deduct ending inventory: $5.10 × 34,500(175,950)Variable cost of goods sold1,761,540Variable operating costs: $1.10 × 345,400379,940Adjustment for variancesTotal variable costs2,141,480Contribution margin5,457,320Fixed costsFixed manufacturing overhead costs1,440,000Fixed operating costs1,080,000Total fixed costs2,520,000Operating income$2,937,320Absorption Costing DataFixed manufacturing overhead allocation rate =Fixed manufacturing overhead/Denominator level machine-hours = $1,440,000÷6,000 = $240 per machine-hourFixed manufacturing overhead allocation rate per unit = Fixed manufacturing overhead allocation rate/standard production rate = $240 ÷50 = $4.80 per unitIncome Statement for the Zwatch Company, Absorption Costingfor the Year Ended December 31, 2007Revenues: $22 × 345,400$7,598,800Cost of goods soldBeginning inventory ($5.10 + $4.80) × 85,000$ 841,500Variable manuf. costs: $5.10 × 294,9001,503,990Allocated fixed manuf. costs: $4.80 × 294,9001,415,520Cost of goods available for sale$3,761,010Deduct ending inventory: ($5.10 + $4.80) × 34,500(341,550)Adjust for manuf. variances ($4.80 × 5,100)a24,480UCost of goods sold3,443,940Gross margin4,154,860Operating costsVariable operating costs: $1.10 × 345,400$ 379,940Fixed operating costs1,080,000Total operating costs1,459,940Operating income$2,694,920aProduction volume variance = [(6,000 hours × 50) – 294,900] × $4.80= (300,000 – 294,900) × $4.80= (300,000 – 294,900) × $4....
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tutorial-solution-week.8 - 9-18(40 min)Variable versus...

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