Dilithium Batteries is a division of Enterprise Corporation. Thedivision manufactures and sells a long-life battery used in a widevariety of applications. During the coming year, it expects to sell60,000 units for $31 per unit. Nyota Uthura is the divisionmanager. She is considering producing either 60,000 or 90,000 unitsduring the period. Other information is presented in theschedule.
Division Information for 2017 Beginning inventory 0 Expected sales in units 60,000 Selling price per unit $31 Variable manufacturing costs per unit $13 Fixed manufacturing overhead costs (total) $540,000 Fixed manufacturing overhead costs per unit: Based on 60,000 units $9 per unit ($540,000 ÷ 60,000) Based on 90,000 units $6 per unit ($540,000 ÷ 90,000) Manufacturing cost per unit: Based on 60,000 units $22 per unit ($13 variable + $9 fixed) Based on 90,000 units $19 per unit ($13 variable + $6 fixed) Variable selling and administrative expenses $2 Fixed selling and administrative expenses (total) $50,000
a) Prepare an absorption costing income statement, with onecolumn showing the results if 60,000 units are produced and onecolumn showing the results if 90,000 units are produced.
b)Prepare a variable costing income statement, with one columnshowing the results if 60,000 units are produced and one columnshowing the results if 90,000 units are produced.
Dilithium Batteries is a division of Enterprise Corporation. Thedivision manufactures and sells a long-life battery used in a widevariety of applications. During the coming year, it expects to sell60,000 units for $31 per unit. Nyota Uthura is the divisionmanager. She is considering producing either 60,000 or 90,000 unitsduring the period. Other information is presented in theschedule.
| Division Information for 2017 | |||
| Beginning inventory | 0 | ||
| Expected sales in units | 60,000 | ||
| Selling price per unit | $31 | ||
| Variable manufacturing costs per unit | $13 | ||
| Fixed manufacturing overhead costs (total) | $540,000 | ||
| Fixed manufacturing overhead costs per unit: | |||
| Based on 60,000 units | $9 | per unit ($540,000 ÷ 60,000) | |
| Based on 90,000 units | $6 | per unit ($540,000 ÷ 90,000) | |
| Manufacturing cost per unit: | |||
| Based on 60,000 units | $22 | per unit ($13 variable + $9 fixed) | |
| Based on 90,000 units | $19 | per unit ($13 variable + $6 fixed) | |
| Variable selling and administrative expenses | $2 | ||
| Fixed selling and administrative expenses (total) | $50,000 |
a) Prepare an absorption costing income statement, with onecolumn showing the results if 60,000 units are produced and onecolumn showing the results if 90,000 units are produced.
b)Prepare a variable costing income statement, with one columnshowing the results if 60,000 units are produced and one columnshowing the results if 90,000 units are produced.
Related questions
| Problem 2 involvesa fixed asset decision. | ||||||||
| FACTS: | ||||||||
| 1. Elliott Incorporatedmanufactures garden tools, and although the manufacturing equipmentis perfectly functional, it is not modern. | ||||||||
| 2. Upgrading to modernequipment would speed up the manufacturing process such that directlabor and variable manufacturing costs | ||||||||
| wouldbe reduced by 40% on a per-unit basis. Hint: You do not needcurrent units produced to calculate this problem. | ||||||||
| 3. The cost of such an upgradewould equal $1,500,000 per year for depreciation and financingcosts net of tax benefits of these costs. | ||||||||
| 4. The additional costs wouldbe accounted for as fixed manufacturing overhead. | ||||||||
| 5. Elliott is currentlyoperating at full capacity and management believes they couldincrease sales to $6,000,000 at current prices if | ||||||||
| they hadadditional capacity. | ||||||||
| Elliott's current sales andcosts are as follows: | ||||||||
| Sales | $4,500,000 | |||||||
| Direct materials | 780,000 | |||||||
| Direct labor | 1,540,000 | |||||||
| Manufacturing overheadâvariable | 364,500 | |||||||
| Manufacturing overheadâfixed | 750,000 | |||||||
| Selling expensesâvariable | 90,000 | |||||||
| Selling expensesâfixed | 250,000 | |||||||
| Administrative expensesâvariable | 60,000 | |||||||
| Administrative expensesâfixed | 200,000 | |||||||
| a. Prepare a CVP for Elliottbased on the current production. | ||||||||
| d. Prepare a CVP based on theproposed equipment upgrade. | ||||||||
On June 30, 2016, the end of the first month of operations,Tudor Manufacturing Co. prepared the following income statement,based on the variable costing concept:
Tudor Manufacturing Co. |
Income Statement - Variable Costing |
For the Month Ended June 30, 2016 |
1 | Sales (415,000 units) | $6,950,000.00 | |
2 | Variable cost of goods sold: | ||
3 | Variable cost of goods manufactured (500,000 units à $13 perunit) | $6,500,000.00 | |
4 | Less ending inventory (85,000 units à $13 per unit) | 1,105,000.00 | |
5 | Variable cost of goods sold | 5,395,000.00 | |
6 | Manufacturing margin | $1,555,000.00 | |
7 | Variable selling and administrative expenses | 79,000.00 | |
8 | Contribution margin | $1,476,000.00 | |
9 | Fixed costs: | ||
10 | Fixed manufacturing costs | $140,000.00 | |
11 | Fixed selling and administrative expenses | 76,000.00 | 216,000.00 |
12 | Income from operations | $1,260,000.00 |
| Required: | |
| A. | Prepare an absorption costingincome statement. In your computations, round unit costs to twodecimal places and round final answers to the nearestdollar. |
| B. | Reconcile the variable costingincome from operations of $1,260,000 with the absorption costingincome from operations determined in (A). Enter all amounts aspositive numbers. |
| Martinez Companyâs relevant range of production is 7,500 units to 12,500 units. When it produces and sells 10,000 units, its unit costs are as follows: |
| Amount Per Unit | |||
| Direct materials | $ | 6.00 | |
| Direct labor | $ | 3.50 | |
| Variable manufacturing overhead | $ | 1.50 | |
| Fixed manufacturing overhead | $ | 4.00 | |
| Fixed selling expense | $ | 3.00 | |
| Fixed administrative expense | $ | 2.00 | |
| Sales commissions | $ | 1.00 | |
| Variable administrative expense | $ | 0.50 | |
| Required: | |
| 1. | For financial accounting purposes, what is the total amount of product costs incurred to make 10,000 units? |
| 2. | For financial accounting purposes, what is the total amount of period costs incurred to sell 10,000 units? |
| 3. | If 8,000 units are sold, what is the variable cost per unit sold? (Round your answer to 2 decimal places.) |
| 4. | If 12,500 units are sold, what is the variable cost per unit sold? (Round your answer to 2 decimal places.) |
| 5. | If 8,000 units are sold, what is the total amount of variable costs related to the units sold? |
| 6. | If 12,500 units are sold, what is the total amount of variable costs related to the units sold? |
| 7. | If 8,000 units are produced, what is the average fixed manufacturing cost per unit produced? |
| 8. | If 12,500 units are produced, what is the average fixed manufacturing cost per unit produced? (Round your answer to 2 decimal places.) |
| 9. | If 8,000 units are produced, what is the total amount of fixed manufacturing cost incurred to support this level of production? |
| 10. | If 12,500 units are produced, what is the total amount of fixed manufacturing cost incurred to support this level of production? |
| 11-a. | If 8,000 units are produced, what is the total amount of manufacturing overhead cost incurred to support this level of production? |
| 11-b. | If 8,000 units are produced, What is this total amount of manufacturing overhead cost expressed on a per unit basis? (Round your answer to 2 decimal places.) |
| 12-a. | If 12,500 units are produced, what is the total amount of manufacturing overhead cost incurred to support this level of production? |
| 12-b. | If 12,500 units are produced, what is this total amount of manufacturing overhead cost expressed on a per unit basis? (Round your answer to 2 decimal places.) |
| 13. | If the selling price is $22 per unit, what is the contribution margin per unit sold? (Round your answer to 2 decimal places.) |
| Required: |
| 14-a. | If 11,000 units are produced, what are the total amounts of direct manufacturing costs incurred to support this level of production? |
| 14-b. | If 11,000 units are produced, what are the total amounts of indirect manufacturing costs incurred to support this level of production? |
| 15. | What total incremental cost will Martinez incur if it increases production from 10,000 to 10,001 units? |
