ACC5160&7130-Ch3-AbsorptionVsVariableCosting-InClassEx

ACC5160&7130-Ch3-AbsorptionVsVariableCosting-InClass...

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Managerial Accounting Fall 2010 In-Class Example for Comparing Absorption and Variable Costing: Tammy’s Clocks began operations on January 1, 2007. During her first year of operation, Tammy produced one model of grandfather clock and had the following actual results: Unit production 100 clocks Unit sales 70 clocks Unit Total Selling price $500 $35,000 Direct materials cost $40 $4,000 Direct labor cost $80 $8,000 Variable overhead cost $35 $3,500 Variable selling cost $20 $1,400 Fixed overhead cost $200 $20,000 Fixed selling cost $30 $2,100 a. What is the unit product cost for 2007 under absorption costing? b. What is the unit product cost for 2007 under variable costing? c. Using absorption costing, what is net operating income for 2007? d. Using absorption costing, what is the value of Tammy’s ending inventory for 2007? On which financial statement would this appear? e. Using variable costing, what is net operating income for 2007?
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Unformatted text preview: f. Using variable costing, what is the value of Tammys ending inventory for 2007? g. Reconcile net operating income under the two methods in 2007 (Production > Sales) h. During 2008, Tammy produced 100 clocks and sold 120. Assuming Tammy had the same selling price and variable costs per unit as in 2007 and the same amount of fixed costs as in 2007, calculate net operating income and ending inventory for 2008 under absorption and variable costing. i. Reconcile net operating income under the two methods in 2008 (Production < Sales) j. During 2009, Tammy produced 120 clocks and sold 120. Assuming Tammy had the same selling price and variable costs per unit as in 2007 and the same amount of fixed costs as in 2007, calculate net operating income and ending inventory for 2009 under absorption and variable costing. Assume LIFO....
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This note was uploaded on 10/03/2010 for the course ACCOUNTING Finance 23 taught by Professor Bob during the Spring '10 term at Wayne State University.

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