Required: (a) Prepare a contribution margin format variable costing income statement for each year, and reconcile the
Question:
Required:
(a) Prepare a contribution margin format variable costing income statement for each year, and reconcile the variable costing net operating income figures against those reflected in Table 1.
(b) Refer to the company’ operating results reflected in Table 1. Prepare a brief report (not more than 250 words) to AEC’s senior management to explain the fluctuations in net operating income from 2019 to 2021. (c) (i) Explain how operations would have differed in 2020 and 2021 if the company had been using Lean Production with the results that ending inventory was zero.
(ii) If Lean production has been in use during 2020 and 2021, and the predetermined overhead absorption rate is based on 40,000 units per year, compute the company’s net operating income/(loss) for each year under absorption costing. Explain the reason for any differences between these income figures and those reported using variable costing. Justify your explanation with a brief computation.
Accounting What the Numbers Mean
ISBN: 978-0078025297
10th edition
Authors: David H. Marshall, Wayne W. McManus, Daniel F. Viele