With flexible work schedules becoming more popular among employees, products in many recreational sporting goods stores...

 

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With flexible work schedules becoming more popular among employees, products in many recreational sporting goods stores are flying off the shelves. Anthony's Kayak Shop is no exception. The shop's tandem kayaks, in particular, are extremely popular as individuals maximize daylight hours with their friends. In reviewing select performance details from the past two years for these kayaks, Anthony sees a strong sales trend and a corresponding increase in income, according to the company's absorption costing income statements. There have also been fixed-MOH volume variances, though. Anthony can't remember what they mean, despite having gone through them with his accountant earlier. Anthony wonders if his income would have been even higher if he had used the variable costing approach that his accountant had once mentioned. Select data for the past two years is presented below for the company's standard cost system, where production was budgeted at 28,300 units both years (beginning FG Inventory in Year 1 carries the same standard per-unit costs as Year 1 production). Beginning FG Inventory (units) Units produced Ending FG Inventory (units) Fixed-MOH cost Year 1 Fixed operating cost Variable manufacturing cost (per unit) Variable operating cost (per unit) Selling price (per unit) 500 27,700 Budgeted Information for Both Years 3,200 Year 2 3,200 27,000 900 $1,528,200 2,250,000 200 50 500 No price or efficiency variances were reported for either year, but any fixed-MOH volume variance is written off directly to COGS. Recreate Anthony's Kayak Shop's income statements for each of the past two years under absorption costing. Sales Less V: COGS Unadjusted COGS Fixed-MOH Volume Variance ✓ Adjusted COGS Gross Margin Less V: SG&A Expenses Variable Expenses Fixed Expenses Operating Income $ $ $ $ Year 1 32400 i 2250000 i $ $ $ Year 2 70200 2250000 With flexible work schedules becoming more popular among employees, products in many recreational sporting goods stores are flying off the shelves. Anthony's Kayak Shop is no exception. The shop's tandem kayaks, in particular, are extremely popular as individuals maximize daylight hours with their friends. In reviewing select performance details from the past two years for these kayaks, Anthony sees a strong sales trend and a corresponding increase in income, according to the company's absorption costing income statements. There have also been fixed-MOH volume variances, though. Anthony can't remember what they mean, despite having gone through them with his accountant earlier. Anthony wonders if his income would have been even higher if he had used the variable costing approach that his accountant had once mentioned. Select data for the past two years is presented below for the company's standard cost system, where production was budgeted at 28,300 units both years (beginning FG Inventory in Year 1 carries the same standard per-unit costs as Year 1 production). Beginning FG Inventory (units) Units produced Ending FG Inventory (units) Fixed-MOH cost Year 1 Fixed operating cost Variable manufacturing cost (per unit) Variable operating cost (per unit) Selling price (per unit) 500 27,700 Budgeted Information for Both Years 3,200 Year 2 3,200 27,000 900 $1,528,200 2,250,000 200 50 500 No price or efficiency variances were reported for either year, but any fixed-MOH volume variance is written off directly to COGS. Recreate Anthony's Kayak Shop's income statements for each of the past two years under absorption costing. Sales Less V: COGS Unadjusted COGS Fixed-MOH Volume Variance ✓ Adjusted COGS Gross Margin Less V: SG&A Expenses Variable Expenses Fixed Expenses Operating Income $ $ $ $ Year 1 32400 i 2250000 i $ $ $ Year 2 70200 2250000

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