Assignment
EXERCISE 1: Variable Costing Income Statement; Explanation of Difference in Net Operating Income
Refer to the data in Exercise 5-1 (I put it below question number 2) for Ida SidhaKarya Company. The absorption costing income statement prepared by the company's accountant for last year appears below:
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Sales
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$191,250
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Cost of goods sold
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157,500
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Gross margin
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33,750
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Selling and administrative expense
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24,500
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Net operating income
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$ 9,250
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Required:
1. Determine how much of the ending inventory consists of fixed manufacturing overhead cost deferred in inventory to the next period.
2. Prepare an income statement for the year using variable costing. Explain the difference in net operating income between the two costing methods.
(5-1 Data)
Ida SidhaKarya Company is a family-owned company located in the village of Gianyar on the island of Bali in Indonesia. The company produces a handcrafted Balinese musical instrument called a gamelan that is similar to a xylophone. The gamelans are sold for $850. Selected data for the company's operations last year follow:
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Units in beginning inventory
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0
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Units produced
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250
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Units sold
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225
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Units in ending inventory
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25
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Variable costs per unit:
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Direct materials
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$100
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Direct labor
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$320
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Variable manufacturing overhead
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$40
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Variable selling and administrative
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$20
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Fixed costs:
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Fixed manufacturing overhead
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$60,000
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Fixed selling and administrative
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$20,000
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EXERCISE 2: Reconciliation of Absorption and Variable Costing Net Operating Incomes
Jorgansen Lighting, Inc., manufactures heavy-duty street lighting systems for municipalities. The company uses variable costing for internal management reports and absorption costing for external reports to shareholders, creditors, and the government. The company has provided the following data:
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Year 1
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Year 2
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Year 3
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Inventories:
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|
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Beginning (units)
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200
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170
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180
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Ending (units)
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170
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180
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220
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Variable costing net operating income
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$1,080,400
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$1,032,400
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$996,400
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The company's fixed manufacturing overhead per unit was constant at $560 for all three years.
Required:
1. Determine each year's absorption costing net operating income. Present your answer in the form of a reconciliation report.
2. In Year 4, the company's variable costing net operating income was $984,400 and its absorption costing net operating income was $1,012,400. Did inventories increase or decrease during Year 4? How much fixed manufacturing overhead cost was deferred or released from inventory during Year 4?
EXERCISE 3: Basic Segmented Income Statement
Royal Lawncare Company produces and sells two packaged products, Weedban and Greengrow. Revenue and cost information relating to the products follow:
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Product
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Weedban
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Greengrow
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Selling price per unit
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$6.00
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$7.50
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Variable expenses per unit
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$2.40
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$5.25
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Traceable fixed expenses per year
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$45,000
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$21,000
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Common fixed expenses in the company total $33,000 annually. Last year the company produced and sold 15,000 units of Weedban and 28,000 units of Greengrow.
Required:
Prepare a contribution format income statement segmented by product lines.
EXERCISE 4: Variable and Absorption Costing Unit Product Costs and Income Statements
Lynch Company manufactures and sells a single product. The following costs were incurred during the company's first year of operations:
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Variable costs per unit:
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Manufacturing:
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Direct materials
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$6
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Direct labor
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$9
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Variable manufacturing overhead
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$3
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Variable selling and administrative
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$4
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Fixed costs per year:
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Fixed manufacturing overhead
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$300,000
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Fixed selling and administrative
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$190,000
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During the year, the company produced 25,000 units and sold 20,000 units. The selling price of the company's product is $50 per unit.
Required:
1. Assume that the company uses absorption costing:
o a. Compute the unit product cost.
o b. Prepare an income statement for the year.
2. Assume that the company uses variable costing:
o a. Compute the unit product cost.
o b. Prepare an income statement for the year.
Format your assignment according to the following formatting requirements:
1. The answer should be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides.
2. The response also includes a cover page containing the title of the assignment, the student's name, the course title, and the date. The cover page is not included in the required page length.
3. Also include a reference page. The Citations and references should follow APA format. The reference page is not included in the required page length.