Carlos Cavalas, the manager of Echo Products' Brazilian Division, is trying to set the production schedule...
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Carlos Cavalas, the manager of Echo Products' Brazilian Division, is trying to set the production schedule for the last quarter of the year. The Brazilian Division had planned to sell 69,410 units during the year, but by September 30 only the following activity had been reported: Inventory, January 1 Production Sales Inventory, September 30 Units 0 73,400 63,100 10,300 The division can rent warehouse space to store up to 29,400 units. The minimum inventory level that the division should carry is 1,400 units. Mr. Cavalas is aware that production must be at least 6,180 units per quarter in order to retain a nucleus of key employees. Maximum production capacity is 44,400 units per quarter. Demand has been soft, and the sales forecast for the last quarter is only 20,800 units. Due to the nature of the division's operations, fixed manufacturing overhead is a major element of product cost. Required: 1a. Assume that the division is using variable costing. How many units should be scheduled for production during the last quarter of the year? 1b. Assume that the division is using variable costing. Will the number of units scheduled for production affect the division's reported income or loss for the year? 2. Assume that the division is using absorption costing and that the divisional manager is given an annual bonus based on divisional operating income. If Mr. Cavalas wants to maximize his division's operating income for the year, how many units should be scheduled for production during the last quarter? Sales ($62 per unit) Cost of goods sold (8 $34 per unit) Gross margin Selling and administrative expenses* Net operating income $3 3 per unit variable; $249,000 fixed each year. Year 1 $ 1,178,000 646,000 532,000 306,000 $ 226,000 The company's $34 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($288,000 24,000 units) Absorption costing unit product cost Year 2 $ 1,798,000 986,000 812,000 336,000 $ 476,000 $ 7 12 3 12 $ 34 Production and cost data for the first two years of operations are: Units produced Units sold Required: Year 1 24,000 19,000 Year 2 24,000 29,000 1. Using variable costing, what is the unit product cost for both years? 2. What is the variable costing net operating income in Year 1 and in Year 2? 3. Reconcile the absorption costing and the variable costing net operating income figures for each year. Lynch Company manufactures and sells a single product. The following costs were incurred during the company's first year of operations: Variable costs per unit: Manufacturing: Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative Fixed costs per year: Fixed manufacturing overhead Fixed selling and administrative $ 14 $ 3 $ 1 $ 1 $ 290,000 $ 200,000 During the year, the company produced 29,000 units and sold 22,000 units. The selling price of the company's product is $42 per unit. Required: 1. Assume that the company uses absorption costing: a. Compute the unit product cost. b. Prepare an income statement for the year. 2. Assume that the company uses variable costing: a. Compute the unit product cost. b. Prepare an income statement for the year. Required information [The following information applies to the questions displayed below.) Chuck Wagon Grills, Incorporated, makes a single product-a handmade specialty barbecue grill that it sells for $210. Data for last year's operations follow: Units in beginning inventory Units produced Units sold Units in ending inventory Variable costs per unit: Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative Total variable cost per unit Fixed costs: Fixed manufacturing overhead Fixed selling and administrative Total fixed costs 0 21,600 19,800 1,800 $ 50 80 20 10 $ 160 $ 756,000 297,000 $ 1,053,000 Required: 1. Assume that the company uses variable costing. Compute the unit product cost for one barbecue grill. 2. Assume that the company uses variable costing. Prepare a contribution format income statement for last year. 3. What is the company's break-even point in terms of the number of barbecue grills sold? Required: 1. Assume that the company uses absorption costing. Compute the unit product cost for one barbecue grill. 2. Assume that the company uses absorption costing. Prepare an income statement for last year. Carlos Cavalas, the manager of Echo Products' Brazilian Division, is trying to set the production schedule for the last quarter of the year. The Brazilian Division had planned to sell 69,410 units during the year, but by September 30 only the following activity had been reported: Inventory, January 1 Production Sales Inventory, September 30 Units 0 73,400 63,100 10,300 The division can rent warehouse space to store up to 29,400 units. The minimum inventory level that the division should carry is 1,400 units. Mr. Cavalas is aware that production must be at least 6,180 units per quarter in order to retain a nucleus of key employees. Maximum production capacity is 44,400 units per quarter. Demand has been soft, and the sales forecast for the last quarter is only 20,800 units. Due to the nature of the division's operations, fixed manufacturing overhead is a major element of product cost. Required: 1a. Assume that the division is using variable costing. How many units should be scheduled for production during the last quarter of the year? 1b. Assume that the division is using variable costing. Will the number of units scheduled for production affect the division's reported income or loss for the year? 2. Assume that the division is using absorption costing and that the divisional manager is given an annual bonus based on divisional operating income. If Mr. Cavalas wants to maximize his division's operating income for the year, how many units should be scheduled for production during the last quarter? Sales ($62 per unit) Cost of goods sold (8 $34 per unit) Gross margin Selling and administrative expenses* Net operating income $3 3 per unit variable; $249,000 fixed each year. Year 1 $ 1,178,000 646,000 532,000 306,000 $ 226,000 The company's $34 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($288,000 24,000 units) Absorption costing unit product cost Year 2 $ 1,798,000 986,000 812,000 336,000 $ 476,000 $ 7 12 3 12 $ 34 Production and cost data for the first two years of operations are: Units produced Units sold Required: Year 1 24,000 19,000 Year 2 24,000 29,000 1. Using variable costing, what is the unit product cost for both years? 2. What is the variable costing net operating income in Year 1 and in Year 2? 3. Reconcile the absorption costing and the variable costing net operating income figures for each year. Lynch Company manufactures and sells a single product. The following costs were incurred during the company's first year of operations: Variable costs per unit: Manufacturing: Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative Fixed costs per year: Fixed manufacturing overhead Fixed selling and administrative $ 14 $ 3 $ 1 $ 1 $ 290,000 $ 200,000 During the year, the company produced 29,000 units and sold 22,000 units. The selling price of the company's product is $42 per unit. Required: 1. Assume that the company uses absorption costing: a. Compute the unit product cost. b. Prepare an income statement for the year. 2. Assume that the company uses variable costing: a. Compute the unit product cost. b. Prepare an income statement for the year. Required information [The following information applies to the questions displayed below.) Chuck Wagon Grills, Incorporated, makes a single product-a handmade specialty barbecue grill that it sells for $210. Data for last year's operations follow: Units in beginning inventory Units produced Units sold Units in ending inventory Variable costs per unit: Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative Total variable cost per unit Fixed costs: Fixed manufacturing overhead Fixed selling and administrative Total fixed costs 0 21,600 19,800 1,800 $ 50 80 20 10 $ 160 $ 756,000 297,000 $ 1,053,000 Required: 1. Assume that the company uses variable costing. Compute the unit product cost for one barbecue grill. 2. Assume that the company uses variable costing. Prepare a contribution format income statement for last year. 3. What is the company's break-even point in terms of the number of barbecue grills sold? Required: 1. Assume that the company uses absorption costing. Compute the unit product cost for one barbecue grill. 2. Assume that the company uses absorption costing. Prepare an income statement for last year.
Expert Answer:
Answer rating: 100% (QA)
Required 1 Variable Costing 1a Units to be Scheduled for Production We can find the number of units to be scheduled for production using the following steps Target Ending Inventory Since sales for the ... View the full answer
Related Book For
Managerial Accounting
ISBN: 978-0697789938
13th Edition
Authors: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer
Posted Date:
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