Assessment 7 Instructions: Variable Costing Conversion

cf_variable_costing_conversion_template.xlsx

Home >Business & Finance homework help >Accounting homework help >Assessment 7 Instructions: Variable Costing Conversion

Problem 1

BUS-FPX4061 - Managerial Accounting Principles
Assessment 7: Variable Costing Conversion												Input values
Problem 1												Company name		Jordan
Solve the given problem based on the following information.												Year 1		2016
												Year 2		2017
Scenario Table 1
Jordan Income Statement Under Absorption Costing												Jordan Income Statement Under Absorption Costing
				2016 ($)		2017 ($)										2016 ($)	2017 ($)
Sales ($45 per unit)					828,000		1,620,000					Sales ($45 per unit)				828,000	1,620,000
Cost of goods sold ($31 per unit)					620,000		1,240,000					Cost of goods sold ($31 per unit)				620,000	1,240,000
Gross margin					208,000		380,000					Gross margin				208,000	380,000
Selling and administrative expenses					261,000		306,000					Selling and administrative expenses				261,000	306,000
Net income/loss					(53,000)		74,000					Net income/loss				(53,000)	74,000
Scenario Table 2												Selling price			$45	per unit
Units Produced and Sold												COGS			$31	per unit
		2016		2017								Variable selling and administrative cost			$2.25	per unit
Units produced			30,000		30,000
Units sold			20,000		40,000
												Units Produced and Sold
·	During 2016 and 2017, the variable cost per unit stayed the same.												2016	2017
·	During 2016 and 2017, the total fixed costs stayed the same.											Units produced	30,000	30,000	TRUE
												Units sold	20,000	40,000
Scenario Table 3
Per Unit Product Cost
Direct materials					$5
Direct labor					$9
Variable overhead					$7							Fixed overhead			$300,000
Fixed overhead ($300,000 / 30,000 units)					$10
Total product cost per unit					$31
												Per Unit Product Cost
Scenario Table 4												Direct materials				$5
Sales and Administrative Expense												Direct labor				$9
						2016 ($)		2017 ($)				Variable overhead				$7
Variable selling and administrative ($2.25 per unit)							45,000		90,000			Fixed overhead ($300,000 / 30,000 units)				$10
Fixed selling and administrative							216,000		216,000			Total product cost per unit				$31
Total selling and administrative							261,000		306,000
Prepare an income statement for each year using variable costing.												Sales and Administrative Expense
																2016 ($)	2017 ($)
												Variable selling and administrative ($2.25 per unit)				45,000	90,000
Jordan Variable Costing Income Statements												Fixed selling and administrative				216,000	216,000
								2016		2017		Total selling and administrative				261,000	306,000
Sales ($45 per unit sold)
Less variable expenses:
Variable production costs ($21 per unit sold*)
Variable selling and administrative costs ($2.25 per unit sold)									45,000		90,000
Total variable costs
Contribution margin
Less fixed expenses:
Factory overhead
Fixed selling and administrative costs									216,000		216,000
Total fixed expenses
Net income
*Note: The variable production cost is computed by adding the per-unit production costs for
direct materials, direct labor, and variable overhead ($5 + $9 + $7 = $21).

Problem 2

Problem 2										Input values
Solve the given problem based on the following information.
										Company name		Jordan
Scenario Table 1
Jordan Income Statement Under Absorption Costing										Jordan Income Statement Under Absorption Costing
				2016 ($)		2017 ($)								2016 ($)	2017 ($)
Sales ($45 per unit)					828,000		1,620,000			Sales ($45 per unit)				828,000	1,620,000
Cost of goods sold ($31 per unit)					620,000		1,240,000			Cost of goods sold ($31 per unit)				620,000	1,240,000
Gross margin					208,000		380,000			Gross margin				208,000	380,000
Selling and administrative expenses					261,000		306,000			Selling and administrative expenses				261,000	306,000
Net income/loss					(53,000)		74,000			Net income/loss				(53,000)	74,000
Scenario Table 2										Selling price			$45	per unit
Units Produced and Sold										COGS			$31	per unit
		2016		2017						Variable selling and administrative cost			$2.25	per unit
Units produced			30,000		30,000
Units sold			20,000		40,000
										Units Produced and Sold
·	During 2016 and 2017, the variable cost per unit stayed the same.										2016	2017
·	During 2016 and 2017, the total fixed costs stayed the same.									Units produced	30,000	30,000	TRUE
										Units sold	20,000	40,000
Scenario Table 3
Per Unit Product Cost
Direct materials					$5
Direct labor					$9
Variable overhead					$7					Fixed overhead			$300,000
Fixed overhead ($300,000 / 30,000 units)					$10
Total product cost per unit					$31
										Per Unit Product Cost
Scenario Table 4										Direct materials				$5
Sales and Administrative Expense										Direct labor				$9
						2016 ($)		2017 ($)		Variable overhead				$7
Variable selling and administrative ($2.25 per unit)							45,000		90,000	Fixed overhead ($300,000 / 30,000 units)				$10
Fixed selling and administrative							216,000		216,000	Total product cost per unit				$31
Total selling and administrative							261,000		306,000
Reconcile the variable costing income to the absorption costing income for these two years.
										Sales and Administrative Expense
														2016 ($)	2017 ($)
Reconciliation of Variable Costing Income to Absorption Costing Income										Variable selling and administrative ($2.25 per unit)				45,000	90,000
						2016 ($)		2017 ($)		Fixed selling and administrative				216,000	216,000
Variable costing income										Total selling and administrative				261,000	306,000
Fixed overhead in ending inventory
Fixed overhead in beginning inventory
Absorption costing income