1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
kakasveta [241]
3 years ago
5

Shawnee Motors Inc. assembles and sells MP3 players. The company began operations on August 1 and operated at 100% of capacity d

uring the first month. The following data summarize the results for August: Sales (11,500 units) $1,265,000 Production costs (15,000 units): Direct materials $610,500 Direct labor 292,500 Variable factory overhead 147,000 Fixed factory overhead 97,500 1,147,500 Selling and administrative expenses: Variable selling and administrative expenses $177,900 Fixed selling and administrative expenses 68,900 246,800 If required, round interim per-unit calculations to the nearest cent. a. Prepare an income statement according to the absorption costing conceptShawnee Motors Inc. Absorption Costing Income Statement For the Month Ended August 31 Sales $ 1,705,000 Cost of goods sold $ $ b. Prepare an income statement according to the variable costing concept. Shawnee Motors Inc. Variable Costing Income Statement For the Month Ended August 31 $ $ $ Fixed costs: $ $ c. What is the reason for the difference in the amount of income from operations reported in (a) and (b)? Under the method, the fixed manufacturing cost included in the cost of goods sold is matched with the revenues. Under , all of the fixed manufacturing cost is deducted in the period in which it is incurred, regardless of the amount of inventory change. Thus, when inventory increases, the income statement will have a higher income from operations than will the variable costing income statement..
Business
1 answer:
melisa1 [442]3 years ago
6 0

Answer:

Preparation of Income statement under absorption is shown below

Preparation of Income statement under variable costing is shown below

The reason for the difference in the amount of income from operations reported in (a) and (b) is shown below

Explanation:

Working note :-

                                             Cost           Unit         Unit cost

Direct material                    $610,500    15,000     40.7

Direct labor                         $292,500   15,000     19.5

Variable factory overhead  $147,000   15,000     9.8 (40.7 + 19.5 + 9.8) = 70

Fixed factory overhead       $97,500    15,000      6.5

Unit product cost                                                      76.5

a.                         Income statement - Absorption

Sales                                      $1,265,000

Cost of goods sold                 $879,750

(11,500 × 76.5)

Gross profit                              $385,250

Fixed Selling and administrative

expenses                                  $246,800

Income from operations          $138,450

b.                           Income statement - Variable costing

Sales                                        $1,265,000

Variable cost of goods sold   $805,000

(11,500 × 70)

Manufacturing margin             $460,000

Variable Selling and administrative

expenses                                    $177,900

Contribution Margin                   $282,100

Fixed cost:

Fixed factory overhead $97,500

Fixed selling and

administration                 $68,900  $166,400

Income from operations                  $115,700

c. Difference is due the part of fixed manufacturing cost related to ending inventory

Variable                                        $115,700

Add: (15,000 - 11,500) × $6.50    $22,750

As per absorption costing            $138,450

In the absorption costing the fixed manufacturing cost involves in the cost of goods sold is equal with the revenue.

and In the variable costing all the fixed manufacturing cost is less in the period in which it is incurred, apart of the amount of change of Inventory.

Therefore, When inventory increases, income statement will having higher income from operations than will the variable costing income statement.

You might be interested in
Fox Corp. failed to accrue warranty costs of $150,000 in its December 31, 20x2, financial statements. In addition, a $130,000 ch
faust18 [17]

Answer:

$150,000

Explanation:

$150,000

The failure to accrue warranty expense is an accounting error. It gives rise to a Prior period adjustment in the year of discovery (20x3).

Prior period adjustments are limited to corrections of errors affecting prior-year net income. They adjust the beginning balance of retained earnings in the year of correction.

The change in depreciation method is an estimate change, which is reported in earnings. It is not a Prior period adjustmen

8 0
3 years ago
Kelly is 28 years old and lives in California. This year 2019 tax year, Kelly bought a new auto for $20,000 plus 1,650 in state
Trava [24]

$8260 + $5500= 13,760 State income taxes, but not sales taxes,

7 0
2 years ago
A commitment whereby the underwriter agrees to purchase any portion of an issue offered to existing shareholders under a rights
bekas [8.4K]

A commitment whereby the underwriter agrees to purchase any portion of an issue offered to existing shareholders under a rights offering that is left unsubscribed is known as a stand-by commitment.

Commitment means the consent of the backstop parties under the Backstop Rights Purchase Agreement, and purchases of all rights offering shares that exceed the Sopris Senior Note Commitment that the rights offering participants do not purchase in accordance with the rights offering.

Commitment: With firm commitment underwriting, the underwriter guarantees that the issuer will purchase all securities for sale, regardless of whether they can be sold to the investor. This is the most desirable arrangement as it immediately guarantees all the money of the issuer.

Commitment usually refers to the insurer's agreement to assume all inventory risk. A firm commitment also means agreeing to buy and sell all IPO securities directly from the issuer. Other uses of commitments relate to loans and derivatives.

Learn more about commitment here: brainly.com/question/472211

#SPJ4

6 0
2 years ago
On October 1, Robertson Company sold inventory in the amount of $5,800 to Alberta, Inc. with credit terms of 2/10, n/30. The cos
NeTakaya

Answer:

Option (d) is correct.

Explanation:

Given that,

Inventory sold to Alberta, Inc. on account = $5,800

Cost of goods sold = $4,000

The journal entries are as follows:

(i) On October 1,

Accounts receivable A/c Dr. $5,800

           To sales A/c                             $5,800

(To record the credit sale of inventory)

(ii) On October 1,

Cost of goods sold A/c Dr. $4,000

         To Merchandise inventory A/c     $4,000

(To record the cost of goods sold)

4 0
3 years ago
You win a lottery with a prize of $1.5 million. Unfortunately the prize is paid in 10 equal annual installments. The first payme
EastWind [94]

The prize is really worth $1,006,512.21.

<h3>What is present value?</h3>

Present value is the sum of cash flows discounted at the rate of interest or the discount rate.  The annual cash flows for the next 10 years = $1.5 million / 10 = 150,000

The present value can be determined using a financial calculator

Cash flow from year 1 to 10 = $150,000

Discount rate = 8%

Present value = $1,006,512.21

Here is the complete question: You win a lottery with a prize of $1.5 million. Unfortunately the prize is paid in 10 an¬nual installments. The first payment is next year. How much is the prize really worth? The discount rate is 8 percent.

To learn more about present value, please check: brainly.com/question/25748668

3 0
2 years ago
Other questions:
  • The size of osha becomes graphically apparent when a simple calculation shows that if the 8 million workplaces were distributed
    9·1 answer
  • With respect to income from services, which of the following is true?a. The income is always amortized over the period the servi
    13·1 answer
  • Natalie is busy establishing both divisions of her business (cookie classes and mixer sales) and completing her business degree.
    10·1 answer
  • In two to three sentences, list the tree steps for effective decisions using marginal analysis
    6·1 answer
  • If a good's production process results in pollution and the government taxes producers to pay for cleanup costs, then :______
    10·1 answer
  • The Regal Cycle Company manufactures three types of bicycles—a dirt bike, a mountain bike, and a racing bike. Data on sales an
    9·1 answer
  • On June 30, 2009, Apricot Co. paid $5,000 cash for management services to be performed over a two-year period. Apricot follows a
    6·1 answer
  • Conlon Enterprises reports the following information about resources. Cost Driver Rate Cost Driver Volume Resources used Setups
    14·1 answer
  • Capital expenditure projects may be classified in all the following types EXCEPT ____. Group of answer choices
    6·1 answer
  • Without having a plan in place, managers may focus only on _____ instead of keeping a long-range view and anticipating new oppor
    7·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!