Variable vs. Absorption answers

Variable vs. Absorption answers - $48,000 variable costing...

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1) Absorption Income Statement Sales $157,500 Cost of Goods Sold $140,000 Gross Margin $17,500 Selling and Administrative Expenses $25,000 Operating Income -$7,500 Contribution Margin Income Statement Sales $157,500 Cost of Goods Sold $112,000 Variable Selling Expense $10,000 Contribution Margin $35,500 Fixed MOH $40,000 Fixed Selling and Administrative $15,000 Operating income -$19,500 2) Ending Inventory for Absorption: Units in ending inventory 600 × Inventoriable cost per unit ×$100 Dollar value of ending inventory $60,000 Ending Inventory for Variable Costing: Units in ending inventory 600 × Inventoriable cost per unit ×$80 Dollar value of ending inventory $48,000
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3) Operating income will be $12,000 higher under absorption costing than it is under variable costing. In this case, both income statements report an operating loss—however that loss is $12,000 less under absorption costing. Under absorption costing, $12,000 more [($60,000 absorption ending inventory
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Unformatted text preview: $48,000 variable costing ending inventory) OR (600 violins $20 fixed manufacturing cost per violin)] is trapped on the balance sheet rather than expensed as part of cost of goods sold in the current period. This $12,000 of cost will flow through the absorption income statement when the violins are sold. Precious Pets Contribution Margin Income Statement Precious Pets Contribution Margin Income Statement For the Year Ended December 31 Sales revenue $987,000 Variable expenses: Cost of goods sold 665,000 Variable selling and marketing expenses 27,400 Variable web site maintenance expenses 14,000 Other variable operating expenses 1,700 Total variable expenses 708,100 Contribution margin 278,900 Fixed expenses: Fixed selling and marketing expenses 33,600 Fixed web site maintenance expenses 42,000 Other fixed operating expenses 15,300 Total fixed expenses 90,900 Operating income $188,000...
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This note was uploaded on 02/28/2011 for the course ACC 241 taught by Professor Karengeiger during the Fall '08 term at ASU.

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Variable vs. Absorption answers - $48,000 variable costing...

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