EXAM2 -...

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Comprehensive Problem:  Variable and Absorption Costing :  30 Points Sydney’s Snow Shovel Company began operations in 2005.  The company uses actual costing and  carries no Work In Process Inventories.  Production and Sales figures for the last three years are as  follows:    2005       2006       2007    Production (in units)    42,000           48,000         35,000 Sales (in units)            38,500            40,000         45,000 For each year, variable production costs were $9 per unit, variable selling expenses were $1.50 per  unit, fixed overhead was $84,000 per year, and fixed selling expenses were $152,000 per year.  The  selling price each year was $30.  The company uses the FIFO method to assign costs to Finished  Goods inventories. A. Prepare, in good form, an absorption costing income statement for 2006.  You do not need a  heading on your statement, but you do need a complete Cost of Goods Sold section.  (11 points)
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B. Prepare, in good form, a variable costing income statement for 2007 (notice that this is a different   year from the requirement in part A of this problem. (12 points)
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C. Using your variable costing income figure from part B of this problem, prepare a reconciliation to  show what absorption costing income would be for the year 2007.  Do NOT prepare an absorption  costing income statement for 2007.  Just prepare a reconciliation. (7 points)  You will only receive  credit for the reconciliation. 1. A is a fixed cost; B is a variable cost.  During the current year, the level of activity has  decreased but is still within the relevant range.  We would expect that a. The cost per unit of A has remained unchanged. b. The cost per unit of B has decreased. c. The cost per unit of A has decreased. d. The cost per unit of B has remained unchanged. 2. Which of the following would usually be considered a discretionary fixed cost for Coca- Cola? a. The cost of advertising its products b. The cost of fire insurance on one of its factory buildings c. Depreciation on its manufacturing equipment d. Both A and B 3. At a volume of 20,000 direct labor hours, Tango Company incurs $50,000 in overhead  costs, including $10,000 in fixed costs.  Assuming that this activity is within the relevant  range, if volume increases to 25,000 direct labor hours, Tango Company would expect to  incur total overhead costs of
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a. $50,000 b. $60,000 c. $62,500 d. $72,500 Use the following information to answer the next three questions:
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This note was uploaded on 12/10/2011 for the course ACCT 208 taught by Professor Kingery during the Winter '08 term at University of Delaware.

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EXAM2 -...

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