Principles of Cost Accounting
Principles of Cost Accounting
17th Edition
ISBN: 9781305087408
Author: Edward J. Vanderbeck, Maria R. Mitchell
Publisher: Cengage Learning
bartleby

Concept explainers

bartleby

Videos

Question
Book Icon
Chapter 10, Problem 3P
To determine

Prepare comparative income statement and comparative schedule of cost of goods sold for each month under (1) absorption costing method and (2) variable costing method.

Expert Solution & Answer
Check Mark

Explanation of Solution

Absorption costing: It refers to the method of product costing in which the price of the product is calculated considering all fixed as well as the variable or direct costs. The valuation of closing inventory in this method is consisting both fixed and variable costs.

Variable costing: It refers to the method of product costing in which the price of the product is calculated considering only the variable or direct costs or the cost that happened to occurred due to the product only. It also called as marginal costing as it takes marginal costs while calculating the product cost.

Prepare comparative income statement and comparative schedule of cost of goods sold for each month under (1) absorption costing method and (2) variable costing method as follows:

Comparative schedule of cost of goods sold for each month:

Principles of Cost Accounting, Chapter 10, Problem 3P , additional homework tip  1

Table (1)

Comparative income statement for each month:

Principles of Cost Accounting, Chapter 10, Problem 3P , additional homework tip  2

Table (2)

Working note (1):

Calculate the absorption costing per unit.

Absorption costing per unit }=[ (Fixed overhead per yearAnnual production units)+Variable cost  per unit]=($360,00072,000 units+$10 per unit)=$5+$10=$15 per unit

Working note (2):

Calculate the ending inventory units for each month.

ParticularsOctoberNovemberDecember
Beginning inventory03,0000
Add: Number of units produced6,0001,0008,000
Less: Number of units sold3,0004,0006,000
    Ending inventory3,00002,000

Table (3)

Working note (3):

Calculate the cost of goods sold and ending inventory under absorption costing for each month.

ParticularsOctoberNovemberDecember
Number of units produced (A)6,0001,0008,000
Absorption cost per unit (B) (1)$ 15$ 15$ 15
Cost of goods manufactured (A×B)$ 90,000$ 15,000$ 120,000
Ending inventories units (C) (2)300002000
Absorption cost per unit (D)$ 15$ 15$ 15
Ending inventory (C×D)$ 45,000$ 0$ 30,000
Beginning inventory units (E) (2)03,0000
Absorption cost per unit (F)$ 15$ 15$ 15
Beginning inventory (E×F)$ 0$ 45,000$ 0

Table (4)

Working note (4):

Calculate the cost of goods sold and ending inventory under variable costing for each month.

ParticularsOctoberNovemberDecember
Number of units produced (A)6,0001,0008,000
Variable cost per unit (B)$ 10$ 10$ 10
Cost of goods sold$ 60,000$ 10,000$ 80,000
Ending inventories units (C) (2)300002000
Variable cost per unit (D)$ 10$ 10$ 10
Ending inventory$ 30,000$ 0$ 20,000
Beginning inventory units (E) (2)0 3,0000
Variable cost per unit (F)$ 10$ 10$ 10
Beginning inventory (E×F)$ 0$ 30,000$ 0

Table (5)

Working note (5):

Calculate the under or over applied fixed overhead.

October:

Under (over) applied overhead} =[ (Fixed factory overheadMonths in a year)(Fixed factory overheadNumber of production units×Units produced)]=[($360,00012)($360,00072,000 units×6,000 units)]=[$30,000($5×6,000)]=$0

November:

Under (over) applied overhead} =[ (Fixed factory overheadMonths in a year)(Fixed factory overheadNumber of production units×Units produced)]=[($360,00012)($360,00072,000 units×1,000 units)]=[$30,000($5×1,000)]=$25,000

December:

Under (over) applied overhead} =[ (Fixed factory overheadMonths in a year)(Fixed factory overheadNumber of production units×Units produced)]=[($360,00012)($360,00072,000 units×8,000 units)]=[$30,000($5×8,000)]=$(10,000)

Working note (6):

Calculate the fixed selling and administrative expense per month.

Fixed selling and administrative expense} = (Fixed selling and administrative expense per year)Months in a year=$48,00012=$4,000

Working note (7):

Calculate the fixed factory overhead per month.

Fixed factory overhead} = (Fixed factory overhead)Months in a year=$360,00012=$30,000

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Students have asked these similar questions
The Western Company presents the production and cost data for the first six months of the 2015.Determine the following using High-low methoda.     estimated variable cost rate b.     fixed cost c. Also determine the cost function on the basis of data given above.
KALIBO CORP. prepared the following absorption-costing income statement for the year ended May 31, 2019 Sales (16,000 units) Cost of goods sold Gross margin Selling and administrative expenses Operating income Additional information follows: Selling and administrative expenses include P1.50 of variable cost per unit sold. There was no beginning inventory, and 17,500 units were produced. Variable manufacturing costs were P11 per unit. Actual fixed costs were equal to budgeted fixed costs. REQUIREMENT: Prepare a variable-costing income statement for the same period. P 320,000 216.000 P104,000 46.000 P 58,000 Absorption Costing Income Statement (Conversion from Variable Net Income) 4. LEGAZPI COMPANY manufactures and sells premium tomato juice by the gallon. LEGAZPI just finished its first year of operations. The following data relates to this first year:
Wolsey Industries Inc. expects to maintain the same inventories at the end of 2016 as at the beginning of the year. The total of all production costs for the year is therefore assumed to be equal to the cost of goods sold. With this in mind, the various department heads were asked to submit estimates of the costs for their departments during the year. A summary report of these estimates is as follows:   1   Estimated Fixed Cost Estimated Variable Cost (per unit sold) 2 Production costs:     3 Direct materials — $46.00 4 Direct labor — 40.00 5 Factory overhead $200,000.00 20.00 6 Selling expenses:     7 Sales salaries and commissions 110,000.00 8.00 8 Advertising 40,000.00 — 9 Travel 12,000.00 — 10 Miscellaneous selling expense 7,600.00 1.00 11 Administrative expenses:     12 Office and officers’ salaries 132,000.00 — 13 Supplies 10,000.00 4.00 14…

Chapter 10 Solutions

Principles of Cost Accounting

Ch. 10 - What is cost-volume-profit analysis?Ch. 10 - Prob. 12QCh. 10 - What steps are required in constructing a...Ch. 10 - What is the difference between the contribution...Ch. 10 - What impact does income tax have on the break-even...Ch. 10 - Define differential analysis, differential...Ch. 10 - Prob. 17QCh. 10 - Prob. 18QCh. 10 - What are distribution costs?Ch. 10 - What is the purpose of the analysis of...Ch. 10 - In cost analysis, what determines which costs...Ch. 10 - Yellowstone Fabricators uses a process cost system...Ch. 10 - Using the information presented in E10-1, prepare...Ch. 10 - The chief executive officer of Acadia, Inc....Ch. 10 - The following production data came from the...Ch. 10 - A company had income of 50,000, using variable...Ch. 10 - The fixed overhead budgeted for Ranier Industries...Ch. 10 - Columbia Products Inc. has two divisions, Salem...Ch. 10 - The sales price per unit is 13 for the Voyageur...Ch. 10 - Teton, Inc. sells its only product for 50 per...Ch. 10 - A new product is expected to have sales of...Ch. 10 - Augusta Industries manufactures and sells two...Ch. 10 - A company has sales of 1,000,000, variable costs...Ch. 10 - Prob. 13ECh. 10 - A company has prepared the following statistics...Ch. 10 - Prob. 15ECh. 10 - Prob. 16ECh. 10 - Redwood Industries needs 20,000 units of a certain...Ch. 10 - Prob. 18ECh. 10 - Biscayne Industries has determined the cost of...Ch. 10 - Roosevelt Enterprises has determined the cost of...Ch. 10 - Prob. 3PCh. 10 - Prob. 4PCh. 10 - Prob. 5PCh. 10 - Arctic Software Inc. has two product lines. The...Ch. 10 - Prob. 7PCh. 10 - The production of a new product required Zion...Ch. 10 - Grand Canyon Manufacturing Inc. produces and sells...Ch. 10 - Prob. 10PCh. 10 - Emerald Island Company is considering building a...Ch. 10 - Royale Aluminum desires an after-tax income of...Ch. 10 - Deuce Sporting Goods manufactures a high-end model...Ch. 10 - Prob. 14PCh. 10 - Prob. 15PCh. 10 - Prob. 1MCCh. 10 - Denali Company manufactures household products...
Knowledge Booster
Background pattern image
Accounting
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
SEE MORE QUESTIONS
Recommended textbooks for you
Text book image
Principles of Cost Accounting
Accounting
ISBN:9781305087408
Author:Edward J. Vanderbeck, Maria R. Mitchell
Publisher:Cengage Learning
Text book image
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
Text book image
Financial And Managerial Accounting
Accounting
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:Cengage Learning,
Text book image
Managerial Accounting: The Cornerstone of Busines...
Accounting
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Cengage Learning
Text book image
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
Text book image
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College
Chapter 6 Merchandise Inventory; Author: Vicki Stewart;https://www.youtube.com/watch?v=DnrcQLD2yKU;License: Standard YouTube License, CC-BY
Accounting for Merchandising Operations Recording Purchases of Merchandise; Author: Socrat Ghadban;https://www.youtube.com/watch?v=iQp5UoYpG20;License: Standard Youtube License