cost review exam 1

cost review exam 1 - REVIEW FOR EXAM 1 COST ACCOUNTING NAME...

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REVIEW FOR EXAM 1 COST ACCOUNTING NAME: 1. Johnson Realty bought a 2,000-acre island for $10,000,000 and divided it into 200 equal size lots. As the lots are sold, they are cleared at an average cost of $5,000. Storm drains and driveways are installed at an average cost of $8,000 per site. Sales commissions are 10% of selling price. Administrative costs are $850,000 per year. The average selling price was $160,000 per lot during 20X5 when 50 lots were sold. During 20X6, the company bought another 2,000-acre island and developed it exactly the same way. Lot sales in 20X6 totaled 300 with an average selling price of $160,000. All costs were the same as in 20X5. Required: Prepare income statements for both years using both absorption and variable costing methods.
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2. The manager of the manufacturing division of Iowa Windows does not understand why income went down when sales went up. Some of the information he has selected for evaluation include: January February Units produced 40,000 30,000 Units sold 30,000 40,000 Sales $600,000 $800,000 Beginning inventory 0 150,000 Cost of production 600,000 550,000 Ending inventory 150,000 0 Operating income 70,000 35,000 The division operated at normal capacity during January. Variable manufacturing cost per unit was $5, and the fixed costs were $400,000. Selling and administrative expenses were all fixed. Required: Explain the profit differences. How would variable costing income statements help the manager understand the division's operating income? 3. The Omega Corporation manufactures two types of vacuum cleaners: the ZENITH for commercial building use and the House-Helper for residences. Budgeted and actual operating data for the year 20X5 are as follows:
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This document was uploaded on 11/03/2011 for the course ACCOUNTING 451 at Rutgers.

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cost review exam 1 - REVIEW FOR EXAM 1 COST ACCOUNTING NAME...

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