Asked by Zachary Summach on Apr 30, 2024
Verified
Landon Company developed the following information for 2014: Selling and Administrative Expenses
Variable $30,000 Fixed $50,000 Units in beginning inventory −0− Units sold 26,000 Direct materials used $65,000 Direct labor $105,000 Units produced 30,000 Manufacturing overhead Variable $40,000 Fixed $90,000\begin{array}{lr}\quad \text { Variable } & \$ 30,000 \\\text { Fixed } & \$ 50,000 \\\text { Units in beginning inventory } & -0- \\\text { Units sold } & 26,000 \\\text { Direct materials used } & \$ 65,000 \\\text { Direct labor } & \$ 105,000 \\\text { Units produced } & 30,000 \\\text { Manufacturing overhead } & \\\quad \text { Variable } & \$ 40,000 \\\quad \text { Fixed } & \$ 90,000\end{array} Variable Fixed Units in beginning inventory Units sold Direct materials used Direct labor Units produced Manufacturing overhead Variable Fixed $30,000$50,000−0−26,000$65,000$105,00030,000$40,000$90,000 Instructions
Answer the following questions.
(a) What would be the amount of the cost of goods sold under the absorption costing approach?
(b) What would be the cost of the ending inventory under the variable costing approach?
(c) Which approach would show the greater income for 2014 and by how much?
Administrative Expenses
Costs associated with the general management of a business, such as salaries of senior executives, legal and financial charges, marketing, and office supplies.
Direct Materials
Materials that can be directly linked to the manufacturing of particular products or services.
Units Sold
The total quantity of products or services sold within a specific period, often used to measure business performance.
- Analyze financial performance and forecast future performance using CVP concepts.
- Prepare and interpret a CVP income statement and understand its relevance for management decision-making.
Verified Answer
JR
Juancho ReynalMay 03, 2024
Final Answer :
Absorption Costing Variable Costing Direct materials. $65,000$65,000 Direct labor 105,000105,000 Variable manufacturing overhead. 40,00040,000 Fixed manufacturing overhead. 90,000 - Total manufacturing costs incurred $300,000$210,000 Production in units$30,000$210,000 Production unit cost $10$7\begin{array}{lcc}&\text { Absorption Costing}&\text { Variable Costing }\\\text { Direct materials. } &\$ 65,000&\$ 65,000\\\text { Direct labor }&105,000&105,000\\ \text { Variable manufacturing overhead. } & 40,000 & 40,000 \\ \text { Fixed manufacturing overhead. } & 90,000 & \text { - } \\ \text { Total manufacturing costs incurred } & \$ 300,000 & \$ 210,000 \\\\\text { Production in units}&\$30,000&\$210,000 \\\text { Production unit cost } & \$ 10&\$7 \\\end{array} Direct materials. Direct labor Variable manufacturing overhead. Fixed manufacturing overhead. Total manufacturing costs incurred Production in units Production unit cost Absorption Costing$65,000105,00040,00090,000$300,000$30,000$10 Variable Costing $65,000105,00040,000 - $210,000$210,000$7 (a) Cost of goods sold under the absorption costing approach would be $260000
(26000 units × $10).
(b) Cost of ending inventory under the variable costing approach would be $28000
(4000 units × $7).
(c) Absorption costing income in 2012 would be greater by $12000 (4000 units × $3).
(26000 units × $10).
(b) Cost of ending inventory under the variable costing approach would be $28000
(4000 units × $7).
(c) Absorption costing income in 2012 would be greater by $12000 (4000 units × $3).
Learning Objectives
- Analyze financial performance and forecast future performance using CVP concepts.
- Prepare and interpret a CVP income statement and understand its relevance for management decision-making.