ch09sol - CHAPTER 9 INVENTORY COSTING AND CAPACITY ANALYSIS...

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CHAPTER 9 INVENTORY COSTING AND CAPACITY ANALYSIS 9-18 (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 1,000 1,000 700 300 300 800 1,100 800 300 300 1,250 1,550 1,500 50 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 $400,000 1,000 $400 $900 $1,300 $400,000 1,000 $400 $900 $1,300 $400,000 1,000 $400 $900 $1,300 9-1
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(a) Variable Costing January 2007 February 2007 March 2007 Revenues a $1,750,000 $2,000,000 $3,750,000 Variable costs Beginning inventory b $ 0 $270,000 $ 270,000 Variable manufacturing costs c 900,000 720,000 1,125,000 Cost of goods available for sale Deduct ending inventory d 900,000 (270,000 ) 990,000 (270,000 ) 1,395,000 (45,000 ) Variable cost of goods sold Variable operating costs e Total variable costs 630,000 420,000 1,050,000 720,000 480,000 1,200,000 1,350,000 900,000 2,250,000 Contribution margin Fixed costs Fixed manufacturing costs Fixed operating costs Total fixed costs Operating income 400,000 140,000 700,000 540,000 $ 160,000 400,000 140,000 800,000 540,000 $ 260,000 400,000 140,000 1,500,000 540,000 $ 960,000 a $2,500 × 700; $2,500 × 800; $2,500 × 1,500 b $? × 0; $900 × 300; $900 × 300 c $900 × 1,000; $900 × 800; $900 × 1,250 d $900 × 300; $900 × 300; $900 × 50 e $600 × 700; $600 × 800; $600 × 1,500 9-2
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Absorption Costing January 2007 February 2007 March 2007 Revenues a Cost of goods sold Beginning inventory b $ 0 $1,750,000 $ 390,000 $2,000,000 $ 390,000 $3,750,000 Variable manufacturing costs c 900,000 720,000 1,125,000 Allocated fixed manufacturing costs d 400,000 320,000 500,000 Cost of goods available for sale 1,300,000 1,430,000 2,015,000 Deduct ending inventory e (390,00 0) (390,000) (65,000) Adjustment for prod. vol. var. f 0 80,000 U (100,000 ) F Cost of goods sold 910,000 1,120,000 1,850,000 Gross margin 840,000 880,000 1,900,000 Operating costs Variable operating costs g 420,000 480,000 900,000 Fixed operating costs 140,000 140,000 140,000 Total operating costs 560,000 620,000 1,040,000 Operating income $ 280,000 $ 260,000 $ 860,000 a $2,500 × 700; $2,500 × 800; $2,500 × 1,500 b $?× 0; $1,300 × 300; $1,300 × 300 c $900 × 1,000; $900 × 800; $900 × 1,250 d $400 × 1,000; $400 × 800; $400 × 1,250 e $1,300 × 300; $1,300 × 300; $1,300 × 50
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This note was uploaded on 05/18/2010 for the course BUSS 210 taught by Professor Paejinhan during the Spring '09 term at Korea University.

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ch09sol - CHAPTER 9 INVENTORY COSTING AND CAPACITY ANALYSIS...

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