1. Required: 1. Assume that the company uses absorption costing.

Compute the unit product cost for one bicycle.

Unit product cost

R 370

2. Assume that the company uses variable costing. Compute the unit product cost for one bicycle.

Unit product cost

R 310

2. Required: 1. Determine how much of the ending inventory consists of fixed manufacturing overhead cost deferred in inventory to the next period.

Total fixed manufacturing overhead in ending inventory

R 120,000

3. 2. Prepare an income statement for the year using variable costing. (Input all amounts as positive values except losses which should be indicated by a minus sign.)

Variable Costing Income Statement Sales Variable expenses: Variable cost of goods sold R
2 2,480,00

R 4,000,000

160,000

Variable selling and administrative expenses

2,640,000

Contribution margin Fixed expenses:

600,000

1,360,000

Fixed manufacturing overhead

400,000

Fixed selling and administrative expenses

1,000,000

Net operating income

R 360,000

4.
Required: Prepare a contribution format income statement for the year segmented by product lines. (Input all amounts as positive values except losses which should be indicated by a minus sign.) Product Line CD $ 300,000 120,000 180,000 138,000 $ 42,000

Sales Variable expenses Contribution margin Traceable fixed expenses Product line segment margin

Total $ 750,000 435,000 315,000 183,000 132,000

DVD $ 450,000 315,000 135,000 45,000 $ 90,000

Common fixed expenses not traceable to products Net operating income

105,000 $ 27,000

5.

Required: 1. Determine whether the company is using absorption costing or variable costing to cost units in the Finished Goods inventory account. a. Calculate the ending balance in the Finished Goods inventory account under variable costing and absorption costing. Ending balance in Finished Good inventory account under variable costing Ending balance in Finished Goods inventory account under absorption costing b. Which costing method is the company using to cost units in the Finished Goods inventory account? Variable costing 2. Assume that the company wishes to prepare financial statements for the year to issue to its stockholders. a. Is the $85,000 figure for Finished Goods inventory the correct amount to use on these statements for external reporting purposes? No, because variable costing is not generally accepted for external reporting. b. At what dollar amount should the 5,000 units be carried in inventory for external reporting purposes? Finished Goods inventory balance for external reporting purposes $ 100,000 $ 85,000 $ 100,000

6.
a. Compute the unit product cost. Unit product cost $ 37

b. Prepare an income statement for the year. (Input all amounts as positive values except losses which should be indicated by a minus sign.) Absorption Costing Income Statement Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating income $ 800,000 592,000 208,000 142,000 $ 66,000

2. Assume that the company uses variable costing: a. Compute the unit product cost. Unit product cost $ 27

b. Prepare an income statement for the year. (Input all amounts as positive values except losses which should be indicated by a minus sign.) Variable Costing Income Statement Sales Less: Variable expenses Variable selling expense $
2 432,000 32,000

$ 800,000

Variable cost of goods sold

464,000

Contribution margin Less: Fixed expenses

200,000

336,000

Fixed manufacturing overhead

2 110,000

Fixed selling and administrative expenses

310,000

Net operating income

$ 26,000

7.
Divisions Total Company Amount % $ 600,000 100.0 300,000 50.0 East Amount $ 400,000 250,000 % 100.0 62.5 Amount $ 200,000 50,000 West % 100.0 25.0

Sales Variable expenses Contribution margin Traceable fixed expenses

300,000 190,000

50.0 31.7

150,000 80,000

37.5 20.0

150,000 110,000

75.0 55.0

Territorial segment margin

110,000

18.3

$ 70,000

17.5

$ 40,000

20.0

Common fixed expenses Net operating income

60,000

10.0

$ 50,000

8.3

8.

Unit product cost

$ 40

b. Prepare an income statement for the month. (Input all amounts as positive values except losses which should be indicated by a minus sign.) Absorption Costing Income Statement Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating income $ 2,100,000 1,400,000 700,000 630,000 $ 70,000

2. Assume that the company uses variable costing. a. Determine the unit product cost. Unit product cost $ 24

b. Prepare a contribution format income statement for the month. (Input all amounts as positive values except losses which should be indicated by a minus sign.) Variable Costing Income Statement

Sales Variable expenses: Variable cost of goods sold $

2 70,000 840,000

$ 2,100,000

Variable selling and administrative expenses

910,000

Contribution margin Fixed expenses:

640,000

1,190,000

Fixed manufacturing overhead

2 560,000

Fixed selling and administrative expenses

1,200,000

Net operating loss

$ -10,000