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Scott product inc._Variable and absorption costing




Question;During the 1st month of operation the device was selling on;the market very well. Ms. Scott was looking forward to a healthy profit. Yet;she was angry to see a loss for the month on the income statement. The;statement was prepare by her account service;Scott product inc. - sale 40,000 unit 200,000;Variable exp;Variable cost of goods sold 80,000;Variable selling exp 30,000 110,000;Contribution margin 90,000;Fixed manufacturing overhead 75,000;Fixed selling exp 20,000;95,000;Net operating loss 5000;Ms. Scott is angry because of the loss for the month. She planned;to use her statement to show investor to purchase stock in her company. A cpa;friend of Ms. Scott said she should use;the absorption cost rather than the variable cost. The cpa inform Ms. Scott if she use the absorption cost rather;than variable then she would have made a profit for the month. Based on the;data of the company operation Scott product inc. unit produced 60,000, units;sold =40,000 variable cost per unit direct material=1.00, direct labor= 80;cents, variable overhead = 20 cents, variable selling exp= 75 cents;Questions I need to complete the following-;1. compare the unit product cost under absorpotion costing;2. redo the company income statement for the month using;absorotion costing.;3. Was ms scott cpa friend was telling her the truth that she;would make a profit. I need to explain this question.;During the 2nd month of operation the company again produce;50,000 unit but sold 60,000 units. Assume;no change in total fix cost;i need to prepare a;contribution format income statement for the month using variable costing;i need to prepare an;income statement for the month using absorption costing;i need to reconcile the variable costing and cost operation;income.


Paper#37238 | Written in 18-Jul-2015

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