Question: Variable costing versus absorption costing Lange Company incurred manufacturing overhead cost for the year as follows. The company produced 1,500 units and sold 1,000 of

Variable costing versus absorption costing Lange Company incurred manufacturing overhead cost for the year as follows.

The company produced 1,500 units and sold 1,000 of them at $180 per unit. Assume that the production manager is paid a 2 percent bonus based on the company's net income.
Required
a. Prepare an income statement using absorption costing.
b. Prepare an income statement using variable costing.
c. Determine the manager's bonus using each approach. Which approach would you recommend for internal reporting and why?

Direct materials $40/unit $28/unit Direct labor Manufacturing overhead Variable Fixed ($20/unit for 1,500 units) Variable selling and admin. expenses Fixed selling and admin. expenses $ 12/unit $ 30,000 $ 8,000 $16,000

Step by Step Solution

★★★★★

3.27 Rating (176 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

a Lange Company Income Statement Absorption Costing Revenues 180000 Cost of Goods Sold Direct materi... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

67-B-M-A-P-P-S (152).docx

120 KBs Word File

Students Have Also Explored These Related Managerial Accounting Questions!

Analysis of Errors: Correcting Entries and Correct Pretax Income Travis Inc. has just completed its nancial statements for the reporting year ended December 31 of Year 5. Pretax income is $160,000....

Dilia Company incurred manufacturing overhead cost for the year as follows: Direct materials............................................................ $50/unit Direct...

Paton Company incurred manufacturing overhead cost for the year as follows. Direct materials ............. $40/unit Direct labor ................ $28/unit Manufacturing overhead Variable...

The following data relate to factory overhead cost for the production of 5,000 computers: If productive capacity of 100% was 8,000 hours and the factory overhead cost budgeted at the level of 5,000...

Variable costing versus absorption costing Murphy Company incurred manufacturing overhead cost for the year as follows. The company produced 1,500 units and sold 1,000 of them at $90 per unit. Assume...

Stuart Company incurred manufacturing overhead cost for the year as follows. The company produced 1,800 units and sold 1,300 of them at $180.30 per unit. Assume that the production manager is paid a...

Stuart Company incurred manufacturing overhead cost for the year as follows. The company produced 1,300 units and sold 800 of them at $181.00 per unit. Assume that the production manager is paid a 2...

Stuart Company incurred manufacturing overhead cost for the year as follows. The company produced 1,800 units and sold 1,300 of them at $180,30 per unit Assume that the production manager is paid a 2...

Benson Company Incurred manufacturing overhead cost for the year as follows. The company produced 1 , 9 0 0 units and sold 1 , 4 0 0 of them at $ 1 8 0 . 9 0 per unit. Assume that the production...

Dilia Company incurred manufacturing overhead cost for the year as follows. $ 50/unit $ 35/unit Direct materials Direct labor Manufacturing overhead Variable Fixed ($25/unit for 1,500 units) Variable...

Munoz Company incurred manufacturing overhead cost for the year as follows. Direct materials $ 39.70/unit Direct labor $ 27.70/unit Manufacturing overhead Variable $ 10.60/unit Tixed ($19.50/unit for...

The City of Lawrence opens a solid waste landfill in 2013 that is at 54 percent of capacity on December 31, 2013. The city had initially anticipated closure costs of $2 million but later that year...

A performance evaluation for new sales representatives at Office Automation Incorporated involves several ratings done on a scale of 1 to 10, with 10 the highest rating. The activities rated include...

Find the function with the Maclaurin series 1 - 9 x + 9 2 x 2 - 9 3 x 3 + 9 4 x 4 - 9 5 x 5 + dots ( U s e symbolic notation and fractions where needed. )

A stockbroker calls on potential clients from referrals. For each call, there is a 10% chance that the client will decide to invest with the firm. Fifty five percent of those interested are found not...

Demonstrate graphically why rent controls might in-crease the total payment that new renters pay for an apartment.

Demonstrate graphically the effect of an effective price ceiling.

In 2008 a drought in Australia's rice-growing regions raised the world price of rice from 12 to 24 cents a pound. Demonstrate graphically the effect of the drought on equilibrium price and quantity...

Explain why a $100 reduction in taxes does not have the same impact on output and employment as a $100 increase in government spending.

What is a production bottleneck?

Jefferson Company owns equipment with a cost of $95,000 and accumulated depreciation of $60,000 that can be sold for $40,000, less a 6% sales commission. Alternatively, the equipment can be leased by...

Grey Company owns a machine with a cost of $320,000 and accumulated depreciation of $60,000 that can be sold for $250,000, less a 5% sales commission. Alternatively, the machine can be leased by Grey...

The Aleutian Company produces two products, Rings and Dings. They are manufactured in two departments, Fabrication and assembly. Data for the products and departments are listed below. Product Number...

You have been asked by the President of your company to evaluate the proposed acquisition of a new spectrometer for the firm's R&D department. The equipment's basic price is $70,000, and it would...

Preferably in excel with formulas please The cooked up spread. You have been doing research on General Electric Company (GE). You note that Ford is currently trading at $6.43. After doing some...