The Chapter 7 Form worksheet is to be used to create your own worksheet version of the Review Problem in the text.

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 in Year 1 under absorption costing?

(b) What is the net operating income in Year 2 under absorption costing?

(c) What is the net operating income in Year 1 under variable costing?

(d) What is the net operating income in Year 2 under variable costing?

3. At the end of Year 1, the companys board of directors set a target for Year 2 of net operating income of $90,000 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 3,800 units.

(a) Would this change result in a bonus being paid to the CEO? (yeso)

(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 2,100 units per year? (yeso)

1 Chapter 7: Applying Excel N 3 Data 4 $ 310 5 6 7 $ 114 8 $ 69 Selling price per unit Manufacturing costs: 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 9 $ 34 10 $ 98,800 11 12 $ 2 13 $ 46,000 14 15 Year 1 Year 2 0 16 Units in beginning inventory 17 Units produced during the year 18 Units sold during the year 2,600 2,100 1,900 2,100