Chapter 7: Applying Excel 2 3 Data 4 Selling price per unit 5 Manufacturing costs: 6 7 8 3 Variable per unit produced: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead per year Selling and administrative expenses: Variable per unit sold Fixed per year 0 1 2 3 4 5 6 Units in beginning inventory 7 Units produced during the year 8 Units sold during the year 9 3 Compute the Ending Inventory 4 5 Units in beginning inventory 5 Units produced during the year Units sold during the year Units in ending inventory O Compute the Absorption Costing Unit Product Cost Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Absorption costing unit product cost Construct the Absorption Costing Income Statement Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating income Enter a formula into each of the cells marked with a ? below 1 Review Problem 1: Contrasting Variable and Absorption Costing 2 Compute the Variable Costing Unit Product Cost Direct materials Direct labor Variable manufacturing overhead Variable costing unit product cost Construct the Variable Costing Income Statement Chapter 7 Form + Ready Accessibility: Unavailable D $50 $11 $6 $3 $120,000 $4 $70,000 Year 1 10,000 8,000 Year 1 Year 1 0 Year 1 Year 1 0 ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? Year 1 Year 2 6,000 8,000 Year 2 Year 2 Year 2 Year 2 ? ? ? ? ? ? ? ? ? ? ? ? ? A

Chapter 7t Apelyine Excel Enter a fomnis into each of the cells masind with a ? below Revlew Problem 1: Contrasting Variable and Absorption Costing Compute the Ending Inventary Units in beginning inventory Units produced during the yesr Units sold during the year Unks in ending inventory Construct the Abs arpolon Cosfing Income Statement Saties Cost of goods sold Gross margin Seling and administratve expenses Net operating income Compute the Variable Costing Unit Product Cast Diect materala Dicect labor. Variable manufecturing ovehead Variable costing unit product cost. Construct the Variable Cosding Income Sta wement Chapter 7 Form Year 1 Ready w? Accessibility? Unavilabie Construct the Variable Costing Income Statement Sales Variable expenses: Variable cost of goods sold Variable selling and administrative expenses Contribution margin Fbed expenses: Fixed manufacturing overhead Fixed selling and administrative expenses Net operating income \begin{tabular}{|c|c|c|c|} \hline Year 1 & & Year2 \\ \hline & ? & & ? \\ \hline? & & & \\ \hline? & ? & ? & ? \\ \hline & ? & & ? \\ \hline? & ? & ? & \\ \hline & ? & ? & ? \\ \hline \end{tabular} 2. Change all of the numbers in the data area of your worksheet so that it looks like this: If your formulas are correct, you should get the correct answers to the following questions. (a) What is the net operating income (loss) in Year 1 under absorption costing? (b) What is the net operating income (loss) in Year 2 under absorption costing? (c) What is the net operating income (loss) in Year 1 under variable costing? (d) What is the net operating income (loss) in Year 2 under variable costing? (e) The net operating income (loss) under absorption costing is less than the net operating income (loss) under variable costing in Year 2 because: (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.) Units were left over from the previous year. The cost of goods sold is alway less under variable costing than under absorphon costing. Sales exceeded production so some of the fixed manufacturing overhead of the period was released from inventories under absorption costing. 3. Make a note of the absorption costing net operating income (loss) in Year 2. At the end of Year 1, the company's board of directors set a target for Year 2 of net operating income of $120,000 under absorption costing. If this target is met, a hefty bonus would be paid to the CEO of the company. Keeping everything else the same from part (2) above, change the units produced in Year 2 to 4,400 units. (a) Would this change result in a bonus being paid to the CEO? Yes No (b) What is the net operating income (loss) in Year 2 under absorption costing? (c) Would this doubling of production in Year 2 be in the best interests of the company if sales are expected to continue to be 2,400 units per year? Yes No