Answer: strategic pillars: content, data, and execution
Explanation:
Part U67 is used in one of Broce Corporation's products. The company's Accounting Department reports the following costs of producing the 15,400 units of the part that are needed every year.
Per Unit
Direct materials $2.30
Direct labor $3.30
Variable overhead $6.10
Supervisor's salary $6.60
Depreciation of special equipment $7.70
Allocated general overhead $4.80
An outside supplier has offered to make the part and sell it to the company for $27.00 each. If this offer is accepted, the supervisor's salary and all of the variable costs, including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company. If the outside supplier's offer were accepted, only $21,400 of these allocated general overhead costs would be avoided.
Required:
a. Prepare a report that shows the financial impact of buying part U67 from the supplier rather than continuing to make it inside the company.
b. Which alternative should the company choose?
Answer:
Broce Corporation
a. The Financial Impact of Buying Part U67 is as follows:
Differential Analysis:
Cost of buying from supplier = $415,800 (15,400 * $27)
Avoidable cost of making = 303,220
Differential cost for buying = $112,500
b. The company should choose to continue to produce the part internally.
Explanation:
a) Data and Calculations:
Production units for the year = 15,400
Per Unit Costs:
Direct materials $2.30
Direct labor $3.30
Variable overhead $6.10
Total variable costs $11.70
Supervisor's salary $6.60
Depreciation of special equipment $7.70
Allocated general overhead $4.80
Total fixed costs $19.10
Total costs $30.80
Outside supplier's offer per unit = $27
Avoidable costs:
Direct materials $2.30
Direct labor $3.30
Variable overhead $6.10
Supervisor's salary $6.60
Total avoidable variable costs $18.30 * 15,400 = $281,820
General overhead costs 21,400
Total avoidable costs = $303,220
Differential Analysis:
Cost of buying from supplier = $415,800 (15,400 * $27)
Avoidable cost of making = 303,220
Differential cost for buying = $112,500
The following transactions occurred during July: Received $1,600 cash for services performed during July. Received $7,800 cash from the issuance of common stock to owners. Received $800 from a customer as payment for services performed during June. Billed $4,700 to customers for services performed on account in July. Borrowed $3,300 from the bank and signed a promissory note. Received $2,200 from a customer for services to be performed during August. What is the amount of revenue that will be reported on the income statement for the month ended July 31
Answer:
the amount of revenue that should be reported is $6,300
Explanation:
The computation of the amount of revenue that should be reported is shown below;
= Cash received + service revenue earned on the account
= $1,600 + $4,700
= $6,300
hence, the amount of revenue that should be reported is $6,300
Basically we add the two items so that the correct value could arrive
On December 1, a six-month liability insurance policy was purchased for $1,134. Analyze the required adjustment as of December 31 using T accounts, and then formally enter this adjustment in the general journal. (Trial balance is abbreviated as TB.)
Answer and Explanation:
As the insurance policy would be for 6 months
So per month it is
= $1,134 ÷ 6 months
= $189
Now the T account is
Prepaid insurance
Opening balance $1,134 Insurance expense $189
balance $945
Income statement
Adjustment $189
Journal entry
Insurance expense $189
To Prepaid insurance $189
(Being insurance expense is recorded)
what's the meaning of GDP?
what's the meaning of GDP?
It means Gross domestic product.
Gross domestic product (GDP) is the total monetary or market value of all the finished goods and services produced within a country's borders in a specific time period.
Gross domestic product tracks the health of a country's economy. It represents the value of all goods and services produced over a specific time period within a country's borders. ... Investors can use GDP to make investments decisions—a bad economy means lower earnings and lower stock prices.
The Dorilane Company specializes in producing a set of wood patio furniture consisting of a table and four chairs. The set enjoys great popularity, and the company has ample orders to keep production going at its full capacity of 2,000 sets per year. Annual cost data at full capacity follow:
Direct labor $ 118,000
Advertising $ 50,000
Factory supervision $ 40,000
Property taxes, factory building $ 3,500
Sales commissions $ 80,000
Insurance, factory $ 2,500
Depreciation, administrative office equipment$4,000
Lease cost, factory equipment $ 12,000
Indirect materials, factory $ 6,000
Depreciation, factory building $ 10,000
Administrative office supplies (billing) $ 3,000
Administrative office salaries $ 60,000
Direct materials used (wood, bolts, etc.) $ 94,000
Utilities, factory $ 20,000
Required:
1. Enter the dollar amount of each cost item under the appropriate headings. Note that each cost item is classified in two ways: first, as variable or fixed with respect to the number of units produced and sold; and second, as a selling and administrative cost or a product cost. (If the item is a product cost, it should also be classified as either direct or indirect.)
Cost Behavior
Selling or Administrative
Product Cost
Cost Item
Variable Fixed Cost Direct Indirect Direct labor$118,000$118,000Advertising50,00050,000Factory supervisionProperty taxes, factory buildingSales commissionsInsurance, factoryDepreciation, administrative office equipmentLease cost, factory equipmentIndirect materials, factoryDepreciation, factory buildingAdministrative office supplies (billing)Administrative office salariesDirect materials used (wood, bolts, etc.)Utilities, factoryTotal costs$118,000
2. Compute the average product cost of one patio set.
Average product cost per set = ????
3. Assume that production drops to only 1,000 sets annually. Would you expect the average product cost per set to increase, decrease, or remain unchanged?
Increase
Decrease
Remain unchanged
Answer:
1.COST BEHAVIOUR
Variable Fixed
$321,000 $182,000
SELLING OR ADMINISTRATIVE
Cost $197,000
PRODUCT COST
Direct Indirect
$212,000 $94,000
2. $153 per set
3. I would expect the average product cost per set to increase.
Explanation:
1. Calculation to Enter the dollar amount of each cost item under the appropriate headings
COST BEHAVIOUR
VARIABLE FIXED
Direct labor $118,000 $0
Advertising $0 $50,000
Factory supervision $0 $40,000
Property taxes, factory building$0 $3,500
Sales commissions$80,000 $0
Insurance, factory $0 $2,500
Depreciation, administrative office equipment$0 $4,000
Lease cost, factory equipment$0 $12,000
Indirect materials, factory $6,000 $0
Depreciation, factory building $0 $10,000
Administrative office supplies (billing) $3,000 $0
Administrative office salaries $0 $60,000
Direct materials used (wood, bolts, etc.)$94,000 $0
Utilities, factory $20,000 $0
TOTAL COSTS $321,000 $182,000
SELLING OR ADMINISTRATIVE
COST
Direct labor $0
Advertising $50,000
Factory supervision $0
Property taxes, factory building $0
Sales commissions $80,000
Insurance, factory $0
Depreciation, administrative office equipment $4,000
Lease cost, factory equipment $0
Indirect materials, factory $0
Depreciation, factory building $0
Administrative office supplies (billing) $3,000
Administrative office salaries$60,000
Direct materials used (wood, bolts, etc.) $0
Utilities, factory $0
TOTAL COSTS $197,000
PRODUCT COST
DIRECT INDIRECT
Direct labor $118,000 $0
Advertising $0 $0
Factory supervision $0 $40,000
Property taxes, factory building$0 $3,500
Sales commissions $0 $0
Insurance, factory $0 $2,500
Depreciation, administrative office equipment $0 $0
Lease cost, factory equipment$0 $12,000
Indirect materials, factory$0 $6,000
Depreciation, factory building $0 $10,000
Administrative office supplies (billing) $0 $0
Administrative office salaries $0 $0
Direct materials used (wood, bolts, etc.)$94,000 $0
Utilities, factory$0 $20,000
TOTAL COSTS $212,000 $94,000
Therefore the dollar amount of each cost item under the appropriate headings will be :
COST BEHAVIOUR
Variable Fixed
$321,000 $182,000
SELLING OR ADMINISTRATIVE
Cost $197,000
PRODUCT COST
Direct Indirect
$212,000 $94,000
2. Computation to determine the average product cost of one patio set.
Using this formula
Average product cost of one patio set =(Direct costs +Indirect costs)/Capacity set per year
Let plug in the formula
Average product cost of one patio set=($212,000+$94,000)/2,000 sets
Average product cost of one patio set =$306,000/2,000 sets
Average product cost of one patio set = $153 per set
Therefore The Average product cost of one patio set will be $153 per set
3. In a situation were the production drops I Would expect the average product cost per set to INCREASE, reason been that the fixed costs would extend over few units which will inturn cause the average cost per unit to increase.
An unfinished desk is produced for $35.65 and sold for $64.20. A finished desk can be sold for $76.00. The additional processing cost to complete the finished desk is $6.15. Provide a differential analysis for further processing. Round your answers to two decimal places, if necessary. Differential revenue from further processing:
Revenue per unfinished desk $___________
Revenue per finished desk _______________
Differential revenue $____________
Differential cost per desk:
Additional cost for producing ___________
Differential from further processing __________
Answer:
Differential revenue from further processing:
= $11.80.
Explanation:
a) Data and Calculations:
Cost of production of an unfinished desk = $35.65
Selling price of an unfinished desk = $64.20
Selling price of a finished desk = $76.00
Additional processing cost = $6.15
Revenue per finished desk $76.00
Revenue per unfinished desk 64.20
Differential revenue $11.80
Differential cost per desk:
Cost of unfinished desk $35.65
Additional cost for producing 6.15
Differential from further processing $41.80
Unfinished Finished Differential
Revenue $64.20 $76.00 $11.80
Cost of production (35.65) (41.80) (6.15)
Net income $28.55 $34.20 $5.65
On January 15, 2020, Vern purchased the rights to a mineral interest for $3,500,000. At that time, it was estimated that the recoverable units would be 500,000. During the year, 40,000 units were mined and 25,000 units were sold for $800,000. Vern incurred expenses during 2020 of $500,000. The percentage depletion rate is 22%. Determine Vern's depletion deduction for 202
Answer: $175,000
Explanation:
Vern's depletion deduction for 2020 will be calculated thus:
= (Cost - Salvage value) / (Estimated Number of units × Number of units extracted
= 3500000/500000 × 25000
= 7 × 25000
= $175000
Therefore, Vern's depletion deduction for 2020 is $175000
Under its executive stock option plan, W Corporation granted options on January 1, 2018, that permit executives to purchase 15 million of the company's $1 par common shares within the next eight years, but not before December 31, 2020 (the vesting date). The exercise price is the market price of the shares on the date of grant, $18 per share. The fair value of the options, estimated by an appropriate option pricing model, is $4 per option. No forfeitures are anticipated. The options are exercised on April 2, 2021, when the market price is $21 per share. By what amount will W's shareholder's equity be increased when the options are exercised? Group of answer choices $315 million. $60 million. $270 million. $330 million.
Answer:
$315 million
Explanation:
Calculation to determine what amount will W's shareholder's equity be increased when the options are exercised
(millions)
Cash $270
($18 exercise price x 15 million shares)
Paid-in capital – stock options (account balance)$60
(4*$15million shares)
Less Common stock $15
(15 million shares at $1 par per share)
Paid-in capital—excess of par (remainder)$315
Therefore The amount that W's shareholder's equity will be increased when the options are exercised is $315 million
The 1255 people residing in the state of Oz want their yellow brick road repaved. It could be repaved with standard asphalt for a cost of $163403 or with shimmering gold asphalt for $8623195. The senator that represents Oz in the national legislature argues that the yellow brick road is a national treasure and a tourist attraction. As such, the senator argues that the nation of 4363963 people should pay for the repaving. Round your answer to two decimals for all of the following questions.
What is the cost per person if the national government pays for gold asphalt?
$ ________ /person
What is the cost per person if the state of Oz pays for gold asphalt?
$ ________/person
What is the cost per person if the state of Oz pays for standard asphalt?
$________/person
Which asphalt will likely be chosen if the residents of Oz?
a. gold asphalt
b. standard asphalt
Which asphalt will likely be chosen if the national bear the cost of repaving?
government bears the cost of repaving?
a. gold asphalt
b. standard asphalt
Answer:
Part 1
Option b, Standard Asphalt as it will cost less per person as compared to the Gold Asphalt.
Part 2
Option B, Standard Asphalt as it will cost less per person as compared to the Gold Asphalt
Explanation:
Given
Total Population of the nation = 4363963
Total population of the state of OZ = 1255
The cost per person if the national government pays for gold asphalt = $8623195/4363963 = 1.976 dollars per person
The cost per person if the state of Oz pays for gold asphalt =
$ 8623195/1255= $6871 per person
The cost per person if the state of Oz pays for standard asphalt =
$163403/1255 = $130 per person
Part 1
Option b, Standard Asphalt as it will cost less per person as compared to the Gold Asphalt.
Part 2
Option B, Standard Asphalt as it will cost less per person as compared to the Gold Asphalt
A company's flexible budget for 22,000 units of production showed per unit contribution margin of $3.50 and fixed costs, $38,600. The operating income expected if the company produces and sells 28,000 units is:
Answer:
$59,400
Explanation:
Operating income = Contribution - Fixed Costs
therefore,
At the activity of 28,000 units results will be :
Contribution (28,000 units x $3.50) $98,000
Less Fixed Costs ($38,600)
Operating Income $59,400
Thus,
The operating income expected if the company produces and sells 28,000 units is $59,400
In a statement of cash flows using the indirect method, an increase in the available-for-sale debt securities account due to an increase in the debt's fair value should be reported as: Group of answer choices A deduction from net income in determining cash flows from operating activities. Not reported. An investing activity. An addition to net income in determining cash flows from operating activities.
Answer: Not reported.
Explanation:
The Indirect method includes Net income in its calculation but this would not include any increase in Available-For-Sale (AFS) debt securities as these fall under other comprehensive income in the balance sheet.
Most importantly, the indirect method of calculating the cash the company has is for calculating just that, the cash. This means that an increase in the AFS security due to its fair value increasing will bring in no additional cash to the company so it is not reported in the cash flow statement.
Carmel Corporation is considering the purchase of a machine costing $52,000 with a 4-year useful life and no salvage value. Carmel uses straight-line depreciation and assumes that the annual cash inflow from the machine will be received uniformly throughout each year. In calculating the accounting rate of return, what is Carmel's average inv
Answer:
$26,000
Explanation:
Average investment = (Initial investment + Salvage value) / 2
Average investment = ($52,000 + $0) / 2
Average investment = $52,000 / 2
Average investment = $26,000
So, Carmel's average investment is $26,000.
DS Unlimited has the following transactions during August.
August 6 Purchases 54 handheld game devices on account from GameGirl, Inc., for $120 each, terms 1/10, n/60.
August 7 Pays $320 to Sure Shipping for freight charges associated with the August 6 purchase.
August 10 Returns to GamerGirl four game devices that were defective.
August 14 Pays the full amount due to GameGirl.
August 23 Sells 34 game devices purchased on August 6 for $140 each to customers on account. The total cost of the 34 game devices sold is $4,257.00. 2.
Required:
Record the period-end adjustment to cost of goods sold on August 31, assuming the company has no beginning inventory and ending inventory has a cost of $2,003.
Answer:
August 6
Debit: Inventory: (54 * $120) = $6480.00
Credit: Accounts Payable: $6,480.00
August 7 - shipping
Debit: Inventory $320.00
Credit: Cash $320.00
August 10
Debit: Accounts Payable :(4 * $120) = $480.00
Credit: Inventory $480.00
August 14
Debit: Accounts Payable : $(6480 - 480) = $6000.00
Credit: Inventory $60.00
Cash : $(6000 - 60) = $5940.00
(August 14th Inventory: $6000 × 1% = $60)
August 23
Debit: Accounts Receivable ($140*34) = $4760
Credit: sales Revenue $4760
August 23
Debit: Cost of Goods Sold $4,257.00
Credit: Inventory $4,257.00
Explanation:
INVENTORY:
If the demand for labor falls from D to D' and wages are sticky on the downward side, there will be unemployment of ________ million. a. 75 b. 100 c. 25 d. None of the above
Answer:
There will be unemployment of 100 million. The correct option is b. 100.
Explanation:
Note: This question is not complete because the graph is not attached. The graph is therefore provided before answering the question. See the attached photo for the graph.
From the attached graph, we have:
Equilibrium units of labor at D = 300 million
Equilibrium units of labor at D’ = 200 million
Employment If the demand for labor falls from D to D' = Equilibrium units of labor at D’ - Equilibrium units of labor at D = 300 million - 200 million = 100 million
Therefore, there will be unemployment of 100 million. The correct option is b. 100.
the objective section of a resume should consist of no more than:
A. One to two sentences
B. One page
C. A half-page
D. One paragraph
Answer:A
Explanation:
A p e x
Answer:
A. One to two sentences
Explanation:
You dont want whomever is reading your resume to think that you are full of yourself.
what are the Computer Design problems and their solutions?
You should consider a person's a. Grade in the class b. Personality before asking them to join your study group. C. All of these d. None of these
All of these
Hope it will helps you!
Which options are available when exporting a table definition and data? Check all that apply
Answer: 1. appending data to an existing table
4. creating a new table and inserting data
Explanation:
Required information Exercise 10-11 Effects of Changes in Profits and Assets on Return on Investment (ROI) [LO10-1] Skip to question [The following information applies to the questions displayed below.]
Fitness Fanatics is a regional chain of health clubs. The managers of the clubs, who have authority to make investments as needed, are evaluated based largely on return on investment (ROI). The company's Springfield Club reported the following results for the past year:
Sales $ 780,000
Net operating income $ 17,940
Average operating assets $ 100,000
The following questions are to be considered independently.
Assume that the manager of the club is able to reduce expenses by $3,120 without any change in sales or average operating assets.
What would be the club’s return on investment (ROI)? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Answer:
Fitness Fanatics
Springfield Club
The return on investment (ROI) = = 21.06%
Explanation:
a) Data and Calculations:
Sales $ 780,000
Net operating income $ 17,940
Average operating assets $ 100,000
1. Assume that the manager of the club is able to reduce expenses by $3,120 without any change in sales or average operating assets, the return on investment would be:
= Net operating income/Average operating assets * 100
= ($ 17,940 + $3,120)/$ 100,000 * 100
= 21.06%
b) The return on investment metric measures an entity's financial performance, using the annual returns and average operating assets or initial investment cost.
Twix Dots Skor
Net income $4,200 $106,000 $76,800
Depreciation expense 31,600 8,400 25,600
Accounts receivable increase (decrease) 42,200 21,000 (4,200 )
Inventory increase (decrease) (21,200 ) (10,600 ) 10,600
Accounts payable increase (decrease) 25,400 (23,400 ) 14,800
Accrued liabilities increase (decrease) (46,600 ) 12,800 (8,400 )
Required:
For each separate company, compute cash flows from operations using the indirect method. (Amounts to be deducted should be indicated by a minus sign.)
Answer:
Twix, Dots, and Skor
Twix Dots Skor
Net income $4,200 $106,000 $76,800
Depreciation expense 31,600 8,400 25,600
Accounts receivable increase (decrease) 42,200 21,000 (4,200 )
Inventory increase (decrease) (21,200 ) (10,600 ) 10,600
Accounts payable increase (decrease) 25,400 (23,400 ) 14,800
Accrued liabilities increase (decrease) (46,600 ) 12,800 (8,400 )
Cash flows from operations ($6,400) $93,400 $102,400
Explanation:
a) Data and Calculations:
Twix Dots Skor
Net income $4,200 $106,000 $76,800
Depreciation expense 31,600 8,400 25,600
Accounts receivable increase (decrease) 42,200 21,000 (4,200 )
Inventory increase (decrease) (21,200 ) (10,600 ) 10,600
Accounts payable increase (decrease) 25,400 (23,400 ) 14,800
Accrued liabilities increase (decrease) (46,600 ) 12,800 (8,400 )
b) Depreciation is added back to the net income. Increases in current assets are cash outflows, reducing cash flows, while decreases are cash inflows, increasing cash flows. On the other hand, increases in current liabilities are cash inflows, increasing cash flows, while decreases are cash outflows, reducing cash flows.
Identify the statement below that is true regarding the Allowance for Doubtful Accounts account. Multiple Choice The account has a normal credit balance and is reported on the balance sheet. The account has a normal debit balance and is reported on the balance sheet. The account has a normal credit balance and is reported on the income statement. The account has a normal debit balance and is reported on the income statement.
Answer: The account has a normal credit balance and is reported on the balance sheet.
Explanation:
The allowance for doubtful accounts refers to the amount of account receivable that the company believes will not be paid by the customers. It is referred to as the bad debt reserve as well.
The allowance for doubtful accounts reduces the accounts receivable. It also has a normal credit balance and is reported on the balance sheet.
Baymont Corporation purchased inventory on account on March 3, 2017, for a gross price of $50,000. The company purchased additional inventory on account on March 10, 2017, for a gross price of $140,000. Baymont Corporation paid for the frst purchase on April 25, 2017, and for the second purchase on March 20, 2017. The company prepares monthly adjusting journal entries and uses the perpetual inventory method. Prepare journal entries for each transaction.
Answer:
Baymont Corporation
Journal Entries:
March 3, 2017: Debit Inventory $50,000
Credit Accounts payable $50,000
To record the purchase of goods on account.
March 10, 2017: Debit Inventory $140,000
Credit Accounts payable $140,000
To record the purchase of goods on account.
March 20, 2017: Debit Accounts payable $140,000
Credit Cash $140,000
To record the payment for goods purchased on account.
April 25, 2017: Debit Accounts payable $50,000
Credit Cash $50,000
To record the payment for goods purchased on account.
Explanation:
a) Data and Analysis:
March 3, 2017: Inventory $50,000 Accounts payable $50,000
March 10, 2017: Inventory $140,000 Accounts payable $140,000
March 20, 2017: Accounts payable $140,000 Cash $140,000
April 25, 2017: Accounts payable $50,000 Cash $50,000
Which of the following is not one of the three types of business arrangements in the United
States?
A. sole proprietorship
B. partnership
C. corporation
D. sole partnership
Answer:
a
Explanation:
A business owned and run by one person is called a(n)
a business owned and run by one person is called a(n)
sole proprietorship
Distributing Cash Dividends to Preferred and Common Shareholders Dechow Company has outstanding 20,000 shares of $50 par value, 6% cumulative preferred stock, and 80,000 shares of $10 par value common stock. The company declares and pays cash dividends amounting to $160,000. a. If no arrearage on the preferred stock exists, how much in total dividends, and in dividends per share, is paid to each class of stock
Answer:
Preferred Stock = $60,000 and $3.00
Common Stock = $100,000 and $1.25
Explanation:
Dividends
Preferred Stock has preference when it comes to dividends payments. The remaining dividends are then paid to Common Stockholders.
Preferred Stock dividend = 20,000 x $50 x 6% = $60,000
Common Stock dividend = $160,000 - $60,000 = $100,000
Dividends per share
Preferred Stock dividend = $60,000 ÷ 20,000 shares = $3.00
Common Stock dividend = $100,000 ÷ 80,000 shares = $1.25
palmer corp is considering the purchase of new equipment the cost savings from the equipment would result in the annual increase income after tax of 133500 the equipment will have an initial cost of 534000 and have a 7 year life is the salvage value estimated to be 9000 what is estimated to be the payback period
Answer:
Payback period= 4 years
Explanation:
The payback period is the estimated length of time in years it takes
the net cash inflow from a project to equate the net cash the initial cost.
Where a project is expected to generate a series of equal annual net cash inflow, the payback period can be calculated as:
The initial invest /Net cash inflow per year
So the payback period for project X
= $534,000/133,500
= 4 years
Payback period= 4 years
What is e- marketing
Answer:
marketing online pretty much
Given the following information, calculate the debt coverage ratio for this investment. Potential gross income: $120,000, Vacancy rate: 9%, Net operating income: $57,900, Operating expenses: $51,300, Acquisition Price: $520,000, Debt service: $40,000.
Answer:
the debt coverage ratio is 1.4475 times
Explanation:
The computation of the debt coverage ratio is shown below;
The Debt coverage ratio for investment is
= net operating income ÷ Total debt
= $57,900 ÷ $40,000
= 1.4475 times
BY dividing the net operating income by the total debt we can get the debt coverage ratio
hence, the debt coverage ratio is 1.4475 times
Gallatin County Motors Inc. assembles and sells snowmobile engines. The company began operations on July 1 and operated at 100% of capacity during the first month. The following data summarize the results for July: 1 Sales (38,000 units) $9,500,000.00 2 Production costs (44,000 units): 3 Direct materials $4,400,000.00 4 Direct labor 1,760,000.00 5 Variable factory overhead 1,100,000.00 6 Fixed factory overhead 660,000.00 7,920,000.00 7 Selling and administrative expenses: 8 Variable selling and administrative expenses $1,170,000.00 9 Fixed selling and administrative expenses 200,000.00 1,370,000.00 Required: a. Prepare an income statement according to the absorption costing concept\.\* b. Prepare an income statement according to the variable costing concept\.\* c. What is the reason for the difference in the amount of Operating income reported in (a) and (b)
Answer:
a.
income statement according to the absorption costing concept.
Sales $9,500,000.00
Less Cost of Sales ($6,840,000.00)
Gross Profit $2,660,000.00
Less Expenses
Variable selling and administrative expenses ($1,170,000.00)
Fixed selling and administrative expenses ($200,000.00)
Net Income $1,290,000.00
b.
income statement according to the variable costing concept
Sales $9,500,000.00
Less Cost of Sales ($6,270,000.00)
Contribution $3,230,000.00
Less Expenses
Fixed factory overhead ($660,000.00)
Variable selling and administrative expenses ($1,170,000.00)
Fixed selling and administrative expenses ($200,000.00)
Net Income $1,200,000.00
c.
The difference is due to fixed cost included in closing inventory under the absorption costing concept.
Explanation:
Production Cost - Absorption Costing
Direct materials $4,400,000.00
Direct labor $1,760,000.00
Variable factory overhead $1,100,000.00
Fixed factory overhead $660,000.00
Total $7,920,000.00
therefore,
Cost of Sales = 38,000 units/ 44,000 units x $7,920,000.00
= $6,840,000
Production Cost - Variable Costing
Direct materials $4,400,000.00
Direct labor $1,760,000.00
Variable factory overhead $1,100,000.00
Total $7,260,000.00
therefore,
Cost of Sales = 38,000 units/ 44,000 units x $7,260,000.00
= $6,270,000
a. Income Statement according to Absorption Costing Concept:
Sales: $9,500,000.00
Cost of Goods Sold:
Direct Materials: $4,400,000.00
Direct Labor: $1,760,000.00
Variable Factory Overhead: $1,100,000.00
Fixed Factory Overhead: $660,000.00
Total Manufacturing Costs: $7,920,000.00
Gross Profit: $1,580,000.00
Selling and Administrative Expenses:
Variable Selling and Administrative Expenses: $1,170,000.00
Fixed Selling and Administrative Expenses: $200,000.00
Total Selling and Administrative Expenses: $1,370,000.00
Operating Income: $210,000.00
b. Income Statement according to Variable Costing Concept:
Sales: $9,500,000.00
Variable Costs:
Direct Materials: $4,400,000.00
Direct Labor: $1,760,000.00
Variable Factory Overhead: $1,100,000.00
Variable Selling and Administrative Expenses: $1,170,000.00
Total Variable Costs: $8,430,000.00
Contribution Margin: $1,070,000.00
Fixed Costs:
Fixed Factory Overhead: $660,000.00
Fixed Selling and Administrative Expenses: $200,000.00
Total Fixed Costs: $860,000.00
Operating Income: $210,000.00
In absorption costing, fixed manufacturing overhead is treated as a product cost and is included in the cost of goods sold. This means that a portion of fixed overhead is allocated to each unit produced, resulting in higher inventory values and a higher cost of goods sold.
In variable costing, fixed manufacturing overhead is treated as a period cost and is not included in the cost of goods sold. It is instead expensed in the period incurred. This means that fixed overhead is only expensed when it is incurred and is not allocated to units in inventory.
Since the number of units produced (44,000 units) exceeded the number of units sold (38,000 units), the fixed overhead allocated to the 6,000 unsold units under absorption costing contributes to the difference in reported operating income between the two methods. In this case, the absorption costing method reports higher operating income due to the allocation of fixed overhead to units in inventory.
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Jose Consulting paid $540 cash for utilities for the current month. Determine the general journal entry that Jose Consulting will make to record this transaction. Multiple Choice Utilities Expense 540 Cash 540 Cash 540 Utilities Expense 540 Cash 540 Accounts Payable 540 Utilities Expense 540 Accounts Payable 540 Prepaid Utilities 540 Accounts Payable 540
Answer: Utilities Expense 540 Cash 540
Explanation:
Journal entry simply refers to the recording of transactions in a company's books. It should be noted that every transaction entered in the general ledger begins with a journal entry.
With regards to the question, the journal entry will be:
Debit Utilities expense $540
Credit Cash $540