Assignment
Vader Collectibles, Inc.
Assignment Learning Goals
This assignment is designed to help you learn how to:
1. Understand the difference between the calculation of product costs under variable costing and absorption costing.
2. Explain what causes a difference between net income under variable costing and absorption costing.
3. Understand segmented income statements and calculate break-even sales for the company as a whole and for individual segments.
Required
1. Read the information about Vader Collectibles, Inc.presented on page 2.
2. Use the calculation forms presented on pages 3 & 4 to organize the information you have been given.
3. Use concepts presented in Chapter 6to make the calculations necessary to determine the required information.
Guidelines and Policies for Graded Assignments
1. Your assignment can be hand-written or computerized using Word or Excel. However, you must present your answer using the forms presented on pages 3 and 4. Five points will be deducted from your score if your answer is not presented using the T-accounts and forms presented on pages 3 and 4.
2. All assignments will be collected at the beginning of the class period in which the assignment is due.
3. All assignments must be turned in during the class period in which they are due in order to receive full credit. As stated in the course syllabus, grades will be reduced by 25% for assignments turned in by midnight of the day they are due. No credit will be given for any assignment turned in after the day on which it is due unless the student discusses a specific situation with the instructor before the assignment is due.
4. Be sure your name and section number is on the assignment you turn in.
Vader Collectibles, Inc.
When Darth Vader isn't too busy ridding the galaxy of rebel scum, he enjoys running his own business, Vader Collectibles, Inc. Vader Collectibles sells premium-quality model Death Stars. The model Death Stars include miniature superlasers with enough power to destroy the four Rebel Trooper action figures that are included with purchase.
After making Vader Collectibles, Inc. profitable by using the awesome power of managerial accounting, Darth Vader has decided to apply for a bank loan in order to obtain funds to expand the business. Up until now, Darth Vader has only been using contribution margin income statements and variable costing, but the bank has requested a traditional income statement that uses absorption costing, which is required by Galactic GAAP.
Information (used for Questions 1-4) on Vader Collectibles, Inc. for the past year is below:
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Selling price per unit
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$90
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Units in beginning inventory
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25,000
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Units produced
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65,000
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Units sold
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77,000
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Units in ending inventory
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13,000
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Variable costs per unit:
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Direct Materials
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$35
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Direct Labor
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$14
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Variable manufacturing overhead
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$8
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Variable selling and administrative
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$11
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Fixed costs
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|
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Fixed manufacturing overhead (total)
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$455,000
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Fixed manufacturing overhead (per unit)
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$7
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Fixed selling and administrative
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$650,000
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Darth Vader realizes that none of the pesky rebels have been buying his model Death Stars, so he is missing out on a sizeable amount of customers. In response, he plans to open a new business segment and sell model X-Wings, which should be more attractive to rebel customers.
Vader believes that if he adds the X-Wing segment, the following information (used for Questions 5 and 6) will be true:
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Company-wide sales
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$12,730,000
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Company-wide variable expense ratio
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68%
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Company-wide net operating income
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$1,525,000
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Death Star segment variable expenses
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$5,236,000
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Death Star segment variable expenses ratio
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70%
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Death Star traceable fixed expenses
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$1,025,000
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X-Wing segment margin
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$989,000
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Requirements:
Using the information presented above, perform the following:
1. Show how the amount of fixed manufacturing overhead per unit is calculated.
2. Calculate product cost per unit using both variable and absorption costing.
3. Calculate the amount of Net Operating Income under absorption costing.
4. Prepare Vader Collectible's absorption costing income statement.
5. Prepare Vader Collectible's segmented income statement.
6. Calculate Vader Collectible's company-wide break-even point in sales dollars.
Vader Collectibles, Inc.
Student Name: Section Number:
1. Fixed manufacturing overhead per unit is $7. Show how this was calculated.
2. Calculate Vader's product cost per unit using both variable costing and absorption costing.
3. If Variable Costing results in Net Operating Income of $589,000, calculate the amount of Net Operating Income under Absorption Costing. Present your answer in the form of a reconciliation report:
4. Prepare Vader Collectibles, Inc.'s Absorption Costing Income Statement.
5. Prepare Vader Collectibles, Inc.'s segmented income statement with the Death Star and X-Wing Segments.Important: for the X-Wing Segment's variable expenses ratio and contribution margin ratio, round to the nearest whole percent (for example, 0.452 would round to 45%). Use these rounded amounts when using the X-Wing's Segment's variable expense or contribution margin ratio in any subsequent calculations.
6. Calculate Vader Collectible's company-wide break-even point in sales dollars.