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leonid [27]
3 years ago
15

A company that produces a single product had a net operating income of $90,000 using variable costing and a net operating income

of $125,750 using absorption costing. Total fixed manufacturing overhead was $58,650 and production was 11,500 units both this year and last year. Last year was the first year of operations. Between the beginning and the end of the year, the inventory level: (Do not round intermediate computation and round your final answer to nearest whole number.)
a. decreased by 7,010 units
b. increased by 7,010 units
c. increased by 35,750 units
d. decreased by 35,750 units
Business
2 answers:
Marina86 [1]3 years ago
6 0

Answer:

Option B, increased by 7,010 units is the correct answer

Explanation:

The profits under absorption costing of $125,750 is higher than the one recorded under variable costing of $90,000,this implies that more inventory items have been charged with fixed cost included in the closing value of inventory.

The fixed manufacturing overhead per unit=$58,650/11,500

                                                                         =$5.1

Invariably, each item of closing inventory under absorption costing has $5.1 of fixed cost included in it.

The difference between both methods' profit figures  $35,750 ($125,750-$90,000)

number of increase in closing inventory=difference in profit figures/fixed cost per  unit

number of increase in closing inventory=$35,750/$5.1

                                                                  =7,010

tensa zangetsu [6.8K]3 years ago
5 0

Answer:

a. Decreased by 7010 units

Explanation:

Variable costing net operating income$ 90,000

Add manufacturing overhead costs

deferred in inventory under absorption

costing ($125,750-$90,000) $35,750

Deduct fixed manufacturing overhead costs released from inventory under absorption costingAbsorption costing net operating income $125,750

Fixed manufacturing overhead per unit = $58,650 ÷ 11,500 units = $5.1 per unit

Manufacturing overhead deferred in (released from) inventory = Fixed manufacturing overhead in endinginventory − Fixed manufacturing overhead in beginning inventory$35,750= ($5.1 per unit × Units in ending inventory) − ($5.1 per unit × Units in beginning inventory)$35,750 = $5.1 per unit × (Units in ending inventory − Units in beginning inventory)(Units in ending inventory − Units in beginning inventory)

= $35,750÷ $5.1 per unit = 7,010 units

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A) FORMULA FOR ACCOUNT RECEIVABLES TURNOVER =

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Given information -

Net sales = $1500,000

Average account receivables = $100,000

Putting the values in formula -

= $1500,000  /   $100,000

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B) FORMULA FOR NUMBER OF DAYS SALES IN RECEIVABLES =

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3 years ago
The Guitar Shoppe reports the following sales forecast: August, $150,000; September, $170,000. Cash sales are normally 30% of to
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Answer:

<u>Thus Calculation of September Cash Receipts is as follows:</u>

September Sales ( $170,000 × 30%)  = $51,000

August Sales ( $150,000 × 55%)        =  $82,500

Total                                                     =  $133,500

Explanation:

September cash receipts will include the following :

  1. 30% of September Sales
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<u>Thus Calculation of September Cash Receipts is as follows:</u>

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August Sales ( $150,000 × 55%)        =  $82,500

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3 years ago
Beaver Company (a multi-product firm) produces 5,000 units of Product X each year. Each unit of Product X sells for $8 and has a
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Calculation to determine what company's overall operating income would Decrease by

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Overall operating income=(5,000 units*$5)-$18,000

Overall operating income=$25,000-$18,000

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2. Conversion cost per equivalent unit: $1,350

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a) Data and Calculations:

                                Units     % of completion          Equivalent unit

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Beginning WIP        120         50%        50%                 60                60

a) Started and

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