ACCT20200 Chapter Notes - Chapter 2: Earnings Before Interest And Taxes, Marginal Revenue, Income Statement

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fuchsiahound508

2 Feb 2017

School

Department

Accountancy

Course

ACCT20200

Professor

O' Tousa

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Document Summary

How to prepare traditional and contribution format income statements for. Cost of goods sold reports the product costs attached to the merchandise sold during the period. Selling and administrative expenses report the period costs that have been expensed as incurred. Gross margin selling and administrative expenses = net operating. Limitations = when used for internal purposes, does not distinguish between fixed and variable costs: contribution format income statements: Heart of contribution approach = distinction between fixed and variable costs. Unique aspect= provides managers with an income statement that clearly distinguishes between fixed and variable costs and therefore aids planning, controlling, and decision making. Separates costs into fixed and variable categories. Sales variable costs = contribution margin: contribution margin: the amount remaining from sales revenues after variable expenses have been deducted this amount contributes toward covering fixed expenses and then toward profits for the period. Cog = varia(cid:271)le (cid:272)ost that gets i(cid:374)(cid:272)luded i(cid:374) the (cid:862)varia(cid:271)le expe(cid:374)ses(cid:863) portion.

Related Questions

Denton Company manufactures and sells a single product.
Cost data for the product are given below:

Variable costs per unit:

Direct materials $7
Direct labor $10
Variable manufacturing overhead $5
Variable selling and administrative $3
Total variable cost per unit $25

Fixed costs per month:

Fixed manufacturing overhead $ 315,000
Fixed selling and administrative $ 245,000
Total fixed cost per month $ 560,000
The product sells for $60 per unit.

Production and sales data for July and August, the first two months of operations, follow:
Units Produced Units Sold
July 17,500 15,000
August 17,500 20,000

The company’s Accounting Department has prepared absorption costing income statements for July and August as presented below:

July August
Sales $900,000 $1,200,000
Cost of goods sold $600,000 $800,000
Gross margin $300,000 $400,000
Selling and administrative expenses $290,000 $305,000
Net operating income $10,000 $95,000

Required:

1. Determine the unit product cost under absorption costing and variable costing.

2. Prepare contribution format variable costing income statements for July and August.

3. Reconcile the variable costing and absorption costing net operating income figures.
*July/August
Variable costing net operating income (loss)
Add/Deduct fixed manufacturing overhead cost deferred in/released from
inventory under absorption costing
Absorption costing net operating income/loss

beigecoyote968

Denton Company manufactures and sells a single product. Cost data for the product are given:


Variable costs per unit:
Direct materials			$	3
Direct labor				10
Variable manufacturing overhead				3
Variable selling and administrative				1
Total variable cost per unit			$	17
Fixed costs per month:
Fixed manufacturing overhead	$	63,000
Fixed selling and administrative		160,000
Total fixed cost per month	$	223,000

The product sells for $46 per unit. Production and sales data for July and August, the first two months of operations, follow:

	Units Produced	Units Sold
July	21,000	17,000
August	21,000	25,000

The companyâs Accounting Department has prepared the following absorption costing income statements for July and August:

	July		August
Sales	$	782,000	$	1,150,000
Cost of goods sold		323,000		475,000
Gross margin		459,000		675,000
Selling and administrative expenses		177,000		185,000
Net operating income	$	282,000	$	490,000

Required:

1. Determine the unit product cost under:

a. Absorption costing.

b. Variable costing.

2. Prepare contribution format variable costing income statements for July and August.

3. Reconcile the variable costing and absorption costing net operating incomes.

peachmacaw787

Using the ï¬nancial statement information from below, create balance sheets and (traditional gross-margin format) income statements for the given years. â¢ From those ï¬nancial statements determine the following for the most current year:

1) Working Capital

2) Current Ratio

3) Quick Ratio

4) Inventory Turnover

5) Average Sales Period

6) Total Asset Turnover

7) Times Interest Earned Ratio

8) Debt-to-Equity Ratio

9) Gross Margin percentage

10) Cost of Goods Sold percentage 1

11) Net Proï¬t Margin percentage

12) Return on Total Assets

13) Return on Equity

14) Earnings per Share

15) Book Value per Share

Year ended Dec. 31, 2016

Cost of Goods Sold 400,000

Cash 35,000

Selling & Administrative Expenses 160,000

Salaries Payable 40,000

Long-term liabilities 270,000

Finished Goods Inventory 55,000

Accounts Payable 20,000

Interest Expense 8,000

Income Tax Expense 30%

Sales Revenue (all on account) 700,000

Plant, Property, and Equipment, net 300,000

Accounts Receivable 60,000

Common Stock ($1 par) 120,000

Year ended Dec. 31, 2015

Cash 30,000

Accounts Receivable 50,000

Finished Goods Inventory 60,000

Plant, Property, and Equipment, net 320,000

Accounts Payable 20,000

Salaries Payable 20,000

Long-term liabilities 300,000

Common Stock ($1 par) 120,000

amaranthcod262

ACCT20200 Chapter Notes - Chapter 2: Earnings Before Interest And Taxes, Marginal Revenue, Income Statement

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