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Variable and absorption costing, sales, and operat...




Variable and absorption costing, sales, and operating-income changes Helmetsmart, a three year-old company, has been producing and selling a single type of bicycle helmet. Helmetsmart uses standard costing. After reviewing the income statements for the first three years, Stuart Weil, president of Helmetsmart, commented, ?I was told by our accountants?and in fact, I have memorized?that our breakeven volume is 49,000 units. I was happy that we reached that sales goal in each of our first two years. But, here?s the strange thing: In our first year, we sold 49,000 units and indeed we broke even. Then, in our second year we sold the same volume and had a positive operating income. I didn?t complain, of course . . . but here?s the bad part. In our third year, we sold 20% more helmets, but our operating income fell by more than 80% relative to the second year! We didn?t change our selling price or cost structure over the past three years and have no price, efficiency, or spending variances . . . so what?s going on?!?


Paper#3665 | Written in 18-Jul-2015

Price : $25