Lively Inc manufactures a single product and is considering whether to use marginal or absorption costing...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Lively Inc manufactures a single product and is considering whether to use marginal or absorption costing to report its budgeted profit in its management accounts. The following information is available: S/unit Direct materials 4 Direct labour 15 Total variable cost per unit $19 Additional information: 1) Units are sold at $50 per unit. 2) Fixed production overheads are budgeted to be $300,000 per month and are absorbed on an activity level of 100,000 units per month. 3) Sales are expected to be 100,000 units for the month and production will be 120,000 units. 4) Fixed selling costs of $150,000 per month will need to be included in the budget. 5) Variable selling costs of $2 per unit. 6) There are no opening stocks. 7) Clearly show the valuation of any stock figures. Required: a) Prepare the budgeted income statement for a month using absorption costing. b) Prepare the budgeted contribution statement using marginal costing. c) Explain the term sunk cost and provide an example to support your answer. [6 Marks] [4 marks] [3 Marks] Lively Inc manufactures a single product and is considering whether to use marginal or absorption costing to report its budgeted profit in its management accounts. The following information is available: S/unit Direct materials 4 Direct labour 15 Total variable cost per unit $19 Additional information: 1) Units are sold at $50 per unit. 2) Fixed production overheads are budgeted to be $300,000 per month and are absorbed on an activity level of 100,000 units per month. 3) Sales are expected to be 100,000 units for the month and production will be 120,000 units. 4) Fixed selling costs of $150,000 per month will need to be included in the budget. 5) Variable selling costs of $2 per unit. 6) There are no opening stocks. 7) Clearly show the valuation of any stock figures. Required: a) Prepare the budgeted income statement for a month using absorption costing. b) Prepare the budgeted contribution statement using marginal costing. c) Explain the term sunk cost and provide an example to support your answer. [6 Marks] [4 marks] [3 Marks]
Expert Answer:
Answer rating: 100% (QA)
a Budgeted Income Statement using Absorption Costing Sales Revenue Units sold 100000 Selling price per unit 50 Total Sales Revenue Units sold Selling price per unit Total Sales Revenue 100000 50 50000... View the full answer
Related Book For
Posted Date:
Students also viewed these finance questions
-
A company manufactures a single product with the following variable costs per unit: Direct materials ...............................7.00 Direct labour ....................................5.50...
-
A company which has been in existence for several years manufactures a single product with a unit selling price of GH34. Production and sales volumes of the product over a three month period have...
-
Refer to the information pertaining to Endless Mountain Company that is provided in Integration Exercise 16. In addition to the budget schedules that you prepared in Integration Exercise 16, insert...
-
State SQL query to satisfy the requirements below: Include the following columns: First Name Last Name Return all rows from the people table where the person's last name is between B and H. Use the...
-
The board of directors of the Cortez Beach Yacht Club (CBYC) is developing plans to acquire more equipment for lessons and rentals and to expand club facilities. The board plans to purchase about...
-
Explain in your own words the meaning of each matrix mentioned in the video. 2.-Meditate. Now that you know the concept of strategic matrices, which matrix would be the most suitable for the company...
-
The velocity field of a flow is given by \(u=-V_{0} y /\left(x^{2}+ ight.\) \(\left.y^{2} ight)^{1 / 2}\) and \(v=V_{0} x /\left(x^{2}+y^{2} ight)^{1 / 2}\), where \(V_{0}\) is a constant. Where in...
-
Kendra, Cogley, and Mei share income and loss in a 3:2:1 ratio. The partners have decided to liquidate their partnership. On the day of liquidation their balance sheet appears as follows. Required...
-
As a manager, how has research helped you manage people and projects? Explain with examples.
-
Match the four functions of payroll activities with their related internal controls: 1. Hiring employees. 2. Timekeeping. 3. Preparing the payroll. 4. Paying the payroll. ________ a. An independent...
-
Belmont Resources, a successful efforts company, operates the Buckley lease in California. In June 2017, Belmont sold 2,500 Mcf of gas @ 14.73 psia with heat content of 1.020 MMBtu/Mcf at 14.65 psia....
-
Geoffrey's income for 2020-21 comprises a salary of 114,600 and dividends received of 4,400. He makes qualifying Gift Aid donations of 7,200 during the year. Calculate his 2020-21 income tax...
-
Under what conditions and terms do you think developing countries should seek and accept foreign aid in the future? If aid cannot be obtained on such terms, do you think developing countries should...
-
The emergence of giant multinational corporations is said to have altered the very nature of international economic activity. In what ways do these MNCs affect the structure and pattern of trading...
-
How important is foreign aid for low- and middleincome developing economies in relation to their other sources of foreign-exchange receipts? Explain the various forms that official development...
-
What features of the political process make effective development policymaking so difficult?
-
Prepare the following documents 1 General Journal 2 T accounts 3 Trial Balance 4 Income statement 5 Owner Equity 6 Balance Sheet Note 1 Computer Equipment linear depreciation on 36 months, residual...
-
You are maintaining a subsidiary ledger account for Police-Training Expenditures for 2013. The following columns are used: Inventory purchases are initially recorded as expenditures. Record the...
-
Galuppi plc is considering whether to scrap some highly specialized old plant or to refurbish it for the production of drive mechanisms, sales of which will last for only three years. Scrapping the...
-
A company has two products with the following unit costs for a period: Production and sales of the two products for the period were Production was at normal levels. Unit costs in opening stock were...
-
The new industrial environment, the usefulness of standard costing is being challenged, and new approaches sought. One approach, pioneered by the Japanese, is to replace standard costs by target...
-
Determine the longitudinal tensile strength of the hybrid carbon/aramid/ epoxy composite described in Problem 3.4 and Figure 3.10 of Chapter 3 if the fiber packing array is square with the closest...
-
For the IM-9/8551-7 carbon/epoxy composite rod design of Problem 3.3 in Chapter 3, what would be the increase in the longitudinal tensile strength compared with that of the original 6061-T6 aluminum...
-
Assuming that the failure mode for longitudinal compression of unidirectional E-glass/epoxy with fiber volume fraction \(v_{\mathrm{f}}=0.6\) is a transverse tensile rupture due to Poisson strains,...
Study smarter with the SolutionInn App