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A B D E H 1 1 An Introduction to Cost Terms and Purposes Free work cells 2 Absorption Costing vs. Variable Costing Answer cells 3 4 Consider the following account balances (in thousands) for the Carolina Corporation: 5 Assume Carolina Corporation starts and ends with no inventory. (i.e. All inventoriable costs are expensed in the year.) 6 I/S Headings Contribution Cost of Fixed Cost Gross Margin Operating Operating Revenue Variable Cost 7 Carolina Corporation End of 2017 Product Period Variable Fixed 8 Direct manufacturing materials 73,000 9 Materials Handling Costs 145,000 10 Indirect manufacturing materials 206,000 11 Manufacturing supervisory salaries 262,000 12 Direct manufacturing labor 217,000 13 Freight-in costs 97,000 14 Plant insurance 9,000 15 Depreciation of manufacturing plant, building, and equipment 45,000 16 Plant utilities (75% dependent on volume) 26,000 17 Plant repairs and maintenance (25% dependent on volume) 12,000 18 Plant equipment leasing costs 65,000 19 Corporate office rent, utilities and equipment 125,000 20 Administrative support costs 71,000 21 Marketing salaries 35,000 22 Sales Commissions 15,000 23 Distribution Costs 20,000 24 Customer Service Costs (20% dependent on volume) 13,000 25 Marketing supplies (90% dependent on volume) 8,000 26 Revenues 1,750,000 27 Total 28 29 Answer cells must remain in the same location so do not insert/delete columns or rows in the file. Numeric answers must include a formula or reference so do not hard enter the answer. 30 9 Answer cells must remain in the same location so do not insert/delete columns or rows in the file. Numeric answers must include a formula or reference so do not hard enter the answer. 0 1 1. Prepare an Absoption Costing Income Statement (through Operating Income) for 2017. 2 3 Carolina Corporation 4 Absorption Costing Income Statement 5 Year Ended December 31, 2017 6 (in thousands) 7 8 Account/Group $ 9 Revenue $ 1,750,000 0 Less: Cost of Goods Sold 1 Equals: Gross Margin 2 Less: Operating Expense 3 Equals: Operating Income 4 5 2. Prepare an Variable Costing Income Statement (through Operating Income) for 2017. 6 7 Carolina Corporation 8 Variable Costing Income Statement 9 Year Ended December 31, 2017 0 (in thousands) 1 2 Account/Group $ 3 4 Less: 5 Equals: 6 Less: 7 Equals: 8