{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

chapter 8 solutions

# chapter 8 solutions - CHAPTER 8 Absorption and Variable...

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

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

View Full Document

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

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: CHAPTER 8 Absorption and Variable Costing 8-14 (20 MINUTES) 1. Cost-volume profit graph: Break-even point: 14,667 units Total cost Revenue Dollars (in millions) \$25 \$20 \$15 \$10 \$5 Units (in thousands) Fixed cost (\$11,000,000) • 5 10 15 8-14 (CONTINUED) 2. Calculation of break-even point: Break-even point = margin on contributi unit cost fixed = 000 , 1 \$ 750 , 1 \$ 000 , 000 , 11 \$ − = 14,667 units (rounded) 3. Variable costing is more compatible with the cost-volume-profit chart, because it maintains the distinction between fixed and variable costs as does CVP analysis. Absorption costing, in contrast, does not maintain the separation of fixed and variable costs. Fixed costs are unitized in the fixed overhead rate and inventoried as product costs along with variable manufacturing costs. 8-21 (45 MINUTES) 1. a. Absorption-costing income statements: Year 1 Year 2 Year 3 Sales revenue (at \$25 per case) .............................. \$2,000,000 \$1,500,000 \$2,250,000 Less: Cost of goods sold (at absorption cost of \$21 per case) * ......................... 1,680,000 1,260,000 1,890,000 Gross margin ............................................................ 320,000 240,000 360,000 Less: Selling and administrative expenses: Variable (at \$ .50 per case) .......................... 40,000 30,000 45,000 Fixed .............................................................. 37,500 37,500 37,500 Operating income ..................................................... \$ 242,500 \$ 172,500 \$ 277,500 *The absorption cost per case is \$21, calculated as follows: production Planned overhead ing manufactur fixed Budgeted + case per cost ing manufactur variable 000 , 80 000 , 400 \$ + \$16 \$5 + \$16 = \$21 8-21 (CONTINUED)...
View Full Document

{[ snackBarMessage ]}

### Page1 / 7

chapter 8 solutions - CHAPTER 8 Absorption and Variable...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online