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W Produce Anything, Inc., a small manufacturing company and The S Corporation makes two types of skis?




Question;W;Produce Anything, Inc., a small manufacturing company, commenced operations at;the beginning of the year. The following income statement for the first quarter;was prepared by MBA graduate #1.;We;Produce Anything, Inc.;Income Statement;For The Quarter Ended March 31;Sales (46,000 units) $2,300,000;Variable expenses;Variable cost of goods;sold 910,800;Variable selling;administrative 368,000;1,278,800;Contribution Margin;1,021,200;Fixed expenses;Fixed manufacturing;overhead 600,000;Fixed selling;administrative 431,200 1,031,200;Net Operating Loss $(10,000);Management is discouraged about the loss. MBA graduate #2 insists that the;company should be using absorption costing instead of variable costing. She (or;he) states that, if absorption costing had been used, the company would have;reported a profit for the quarter.;For the first quarter, the company is producing only one product. Production;and cost data relating to that product for the first quarter is;Units produced 50,000;Units sold 46,000;Variable costs per unit;Direct materials $4.20;Direct labor 14.40;Variable manufacturing;overhead;1.20;Variable selling;administrative;8.00;Required;1a] Compute the unit cost under;absorption costing.;b] Redo the company?s income;statement for the quarter using absorption costing.;c] Reconcile the variable and;absorption costing net operating income (loss) figures.;2] Was the MBA graduate #2 correct in;stating that the company really earned a profit for the quarter? Please explain;your answer.;3] During the second quarter of;operations, the company again produced 50,000 units but sold 54,000 units.;(Assume no change in fixed costs.);a) Prepare a contribution format;income statement for the second quarter using variable costing.;b) Prepare an income statement for;the second quarter using absorption costing.;c) Reconcile the variable and;absorption costing net operating incomes.;The;S Corporation makes two types of skis?Better and Great. The data for the two;product lines is;Better Great;Selling price per unit;210 150;Direct materials per unit ($) 110 80;Direct labor per unit ($) 30 15;Direct labor-hours per unit 2 1;Estimated annual production 12,500 55,000;The company has a traditional costing system in which manufacturing overhead is;applied to units based on direct labor-hours.;Estimated total manufacturing;overhead $2,000,000;Estimated total direct labor-hours 80,000DLHs;Required;1] Using Exhibit 6-12 as a guide;compute the product margins for the Better and Great products under the;company?s traditional costing systems. Assume all units are sold.;2] The company is considering;replacing its traditional costing system with an activity-based costing system;that would assign its manufacturing overhead to the following four activity;cost pools (the other category contains organization-sustaining and idle;capacity costs),Activities and activity measures Est. Overhead costs Expected activity;Better;Great Total;Supporting direct labor(DLH);784,000 25,000;55,000 80,000;Batch setups (set ups) 500,000 400 100 500;Product sustaining (# of;products) 600,000 1 1 2;Other 116,000;N/A N/A N/A;Total manufacturing overhead 2,000,000;Using Exhibit 6-10 as a guide, compute the product margins for the Better and;Great products under the activity-based costing system.


Paper#38777 | Written in 18-Jul-2015

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