{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Ch 6 Slides - 7-l Learning Objective 1 Variable Costing A...

Info icon This preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
7-l Variable Costing: A Tool for Management Chapter Six Learning Objective 1 Quick Check / Which method will produce the highest values for work in process and finished goods inventories? a Absorption costing, b. Variable costing. c They produce ihe same values for these inventories. d ll depends. Unit Cost Computations Harvey Company produces a single product with the following information available: Number of units produced annually 25,000 Variable cosls per unit: Direct materialq direct labor, and variable mfr. overhead $ 10 Selling & admini$rative expenses t 3 Fixed co*s per year: Manufacturing overhead $150,000 Selling & adminigrative expenses t 100,000 Variable Variable Setling and Admrnrstrative Expenses Fixed S€lljng sd Administsative Epems Quick Check / Which rnelhod will produce the highest values for work in process and finished goods inventories? @ausomtion costing. b. Variable costing. c. They produce the same values forthese inventories. d. lt depends .
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Unit Cost Gomputations Unit product cost is determined as follows: Under absorption costing, selling and administrative expenses are always treated as period expenses and deducted from revenue as incurred. DiFctnabriats, diFct labor, znd Yariabl,s mfig- ovddreid Fixed f,t- ovcrhead ($'150,0d1 + 25,dto unis) Unit prcdqct sst Absrption Va raable Coeling Coding I $10 610 sto A 1g 7-2 Learning Objective 2 Absorption Costing Absorption Costing Sales (20.000 x 930) ------5600.000 Les cod of goods Fld: Beginning inventory S - Add COGM (25,000 x S15) 400.000 Goods available for Eie 400.000 Ending inventory (5,000 x $.f6) 80,000 320,000 Gro$ margin ,BO.OO0 Les slling E admin. exp Variable (20rm0 r S3) S 60,000 Fixed 100.000 Net operating income 160.000 -S izo"ooo Learning Objective 3 pa Absorption and Variable Let's assume the following additional information for Harvey Company. . 20,000 units were sold during the year at a price of $30 each r There were no units in beginning inventory Now, let's compute net operating income using both absorption and variable costing. ? s Variable Costing variable mufacluring cost3 onty. Goods sEilabl. tor sle Les ending inwdtory [5,fi]0 r Vadable col of goodE $ld V.ri.ble -lling t admini#aliE erp€n=s (20,000 x 93) Cqtibutim m.rgin Les tixed erpen*s: Manufaoturing owrhsed Sclling &.dmini*rtiw crp!n*s l,let oFEting in6ore
Image of page 2
7-3 Comparing the Two Methods !rry-?ri!! t9L!t.9- Variable mtg cods S200,000 F;xed mtg cos 12n,040 $ 320!000 Vrd.ble costing Variable fifg cos $200,000 Fixed mfg cods $ 200.000 6 50000 I - 30 00c -s80,0(}0.3 \- \\ s sorjR b - \\rso ooo $ 5d 00o s 150,000 I 250,000 150,000 _!_19!,4!0 t 250,000 150,000 $400,000 Comparing the Two Methods We can reconcile the difference between absorption and
Image of page 3

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}