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Chem Corp is a textile manufacturer that makes clo...

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Chem Corp is a textile manufacturer that makes cloth for clothing manufacturers. Chem has been a privately held company however the steady growth is enabling Chem Corp expand. Chem Corp plans to go public by publically selling shares of company stock in to generate cash to fund growth. After the stock sale, Chem Corp will be a publicly held company and will need to meet SEC financial statement reporting requirements. Chem Corp?s management accountant must now prepare Absorption Costing Income Statements to support the new external reporting requirements. Additionally, the decision must be made as to how internal performance evaluations will be made on department performance. Chem?s management has asked the management accountant to prepare the following income statements for comparison: Variable Costing and Absorption (Full) Costing for each of the last two years. Partial Performance Reports for the two most recent of periods are included. Additional information includes: production for year 1 = 53,200 units. Production for year 2 = 49,500 units. There was no beginning inventory in year 1. Required: Complete each of the following questions. For problems: show your work, provide labels and descriptions of amounts, be organized in your work and clearly show your solution to the question. When asked to ?Explain? your answer should be a minimum of 50 words supported by course content information and details for full credit. 1. Prepare ?actual? income statements for each year (years 1 and 2) using Variable Costing. 2. Prepare ?actual? income statements for each year (years 1 and 2) using Absorption Costing. 3. If you are the production manager, which method do you prefer for evaluation of your performance, Variable or Absorption? Explain your answer from the perspective of the production manager. 4. What do variable and absorption income statements have to do with the chapter title: ?Incentive to Overproduce?? Explain your answer from the perspective of top management. 5. What do you recommend as Chem Corp?s performance evaluation method to achieve goal congruence? Explain your answer. Chem Corp Performance Report of Revenue & Costs For the fiscal year ended Year 1 Flex Bud Flexible Sales Volume Static Actual Variance Budget Variance Budget Units sold 5 0,000 - 5 0,000 ( 3,300) 5 3,300 Revenues 12,250,000 (250,000) 12,500,000 (825,000) 13,325,000 Variable Costs: Direct Materials 4,256,000 (506,000) 3,750,000 2 47,500 3,997,500 Direct Labor 2,394,000 1 06,000 2,500,000 1 65,000 2,665,000 Var Manufacturing 1,596,000 (96,000) 1,500,000 9 9,000 1,599,000 Var Sell & Admin 7 50,000 - 7 50,000 4 9,500 7 99,500 Fixed Costs Manufacturing 2 60,000 (10,000) 2 50,000 - 2 50,000 Sell & Admin 5 0,000 - 5 0,000 - 5 0,000 Total Costs 9,306,000 (506,000) 8,800,000 5 61,000 9,361,000 For the fiscal year ended Year 2 Flex Bud Flexible Sales Volume Static Actual Variance Budget Variance Budget Units sold 5 1,500 - 5 1,500 ( 2,000) 5 3,500 Revenues 12,617,500 7 0,596 12,546,904 (828,096) 13,375,000 Variable Costs: Direct Materials 3,960,000 (195,929) 3,764,071 2 48,429 4,012,500 Direct Labor 2,227,500 2 81,881 2,509,381 1 65,619 2,675,000 Var Manufacturing 1,485,000 2 0,629 1,505,629 9 9,371 1,605,000 Var Sell & Admin 7 72,500 (19,686) 7 52,814 4 9,686 8 02,500 Fixed Costs Manufacturing 2 60,000 (10,000) 2 50,000 - 2 50,000 Sell & Admin 5 0,000 - 5 0,000 - 5 0,000 Total Costs 8,755,000 7 6,895 8,831,895 5 63,105 9,395,000

 

Paper#3077 | Written in 18-Jul-2015

Price : $25
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