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ACC- The Independence Company




Question;5-A1;The Independence Company had the following manufacturing data for the year 2009 (in thousands of dollars);Beginning and ending inventories None;Direct material used $400;Direct Labor 300;Supplies 20;Utilities-variable portion 40;Utilities-fixed portion 15;Indirect Labor-variable portion 90;Indirect Labor-fixed portion 50;Depreciation 200;Property Taxes 20;Supervisory salaries 60;Selling expenses were $300,000 (including $80,000 that were variable) and general administrative expenses were $144,000 (including $25,000 that were variable). Sales were $2.2 million.;Direct labor and supplies are regarded as variable costs.;1. Prepare two income statements, one using the contribution approach and one using that absorption approach.;2. Suppose that all variable cost fluctuate directly in proportion to sales and that fixed costs are unaffected over a very wide range of sales. What would operating income have been if sales had been $2.0 million instead of $2.2 million? Which income statement did you use to help obtain your answer? Why?


Paper#44532 | Written in 18-Jul-2015

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