WEEK 7 HWM

Shastri Bicycle of Bombay, India, produces an inexpensive, yet rugged, bicycle for use on the city's crowded streets that it sells for 500 rupees. rupees. Indian currency is denominated in rupees, denoted by !." Selected Selected data for  the company's operations last year follow#

$nits in beginning inventory $nits produced $nits sold $nits in ending inventory Requirement 2: %ariable %ariable costs per unit#  ssume that the company uses variable costing. (ompute the t he unit product cost for one bicycle. (Omit the "R" sign in your response.) $nit $nit produ roduct ct cost cost

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&ixed costs#

Requirement 1:  ssume that the company uses absorption costing. (ompute the unit product cost for one bicycle. "R" sign in your response.) $nit product cost

Shastri Bicycle of Bombay, India, produces an inexpensive, yet rugged, bicycle for use on the city's crowded streets that it sells for 500 rupees. Indian currency is denominated in rupees, denoted by !." Selected data for the company's operations last year follow#

$nits in beginning inventory

0

$nits produced

*0,000

$nits sold

+,000

$nits in ending inventory

,000

%ariable costs per unit# -irect materials

!

*0

-irect labor

!

*0

%ariable manufacturing overhead

!

50

%ariable selling and administrative

!

0

&ixed costs# &ixed manufacturing overhead

! /00,000

&ixed selling and administrative

! 00,000

 n absorption costing income statement prepared by the com pany's accountant appears below#

Sales +,000 units  !500 per unit"

!

,000,00 0

(ost of goods sold# Beginning inventory

!

0

 dd cost of goods manufactured *0,000 *0,00 0 units  ! 1 per unit"

2,300,00 0

4oods available for sale

2,300,00 0

ess ending inventory ,000 units  ! 1

per unit"

 

,6/0,00 0

3 3 0,000

*,00,00 0

4ross margin Selling and administrative expenses# %ariable selling and administrative

*/0,000

&ixed selling and administrative

00,000

7et operating income

5/0,000 !

+0,000

Requirement 1: -etermine -etermine how much of the ending inventory of !30,000 !30,000 above consists consists of fixed manufacturing manufacturing overhead

cost deferred in inventory to the next period. (Omit the "R" sign in your response.) &ixe &ixed d man manuf ufac actu turi ring ng ove overh rhea ead d

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Requirement 2: 8repare an income statement for the year using the variable costing method. (Leave no cells blank  be certain to enter "!" herever require#. Omit the "R" sign in your response.)

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%ariable expenses# Variable cost of goods sold:

Beginning inventory

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(ontribution margin

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Fixed expenses:

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9igh :ension :ension :ransformers, Inc., manufactures heavy; duty transformers for electrical switching stations. :he company uses variable costing for internal management reports and absorption costing for external reports to shareholders, creditors, and the government. :he company has provided the following data#



5*,+00

:he company's fixed manufacturing overhead per unit was constant at >50 for all three years.

Requirement 1: -etermine each year's absorption costing net operating income. (Omit the "$" sign in your response.) )))))))))))) 

Requirement 2: In

*+

-irect labor

>

3

%ariable manufacturing overhead

>



%ariable selling and administrative

>

5

&ixed costs per year# &ixed manuf acturing overhead

> */0,000

&ixed selling and administrative expenses

> **0,000

-uring the year, the company produced 0,000 units and sold */,000 units. :he selling price of the company's product is >50 per unit. Rquirement 1:  ssume that the company uses absorption costing# (a) (ompute the unit product cost. (Omit the "$" sign in your response.) $nit product cost

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year. (Omit the "$" sign in your response.) (b) 8repare an income statement for the year. (Omit

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Less variable expenses: Variable cost of goods sold #

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%ariable cost of goods sold

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Less fixed expenses:

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 mcor, Inc., incurs the following costs to produce and sell a single product.

%ariable costs per unit# -irect materials

>

*0

-irect labor

>

5

%ariable manufacturing overhead

>



%ariable selling and administrative expenses

>



&ixed manufacturing overhead

>

60,000

&ixed selling and administrative expenses

>

200,000

&ixed costs per year#

-uring the last year, 20,000 units were produced and 5,000 units were sold. :he &inished 4oods inventory account at the end of the year shows a balance of >+5,000 for the 5,000 unsold units. Requirement 1: (a) Is the company using absorption costing or variable costing to cost units in the &inished 4oods inventory account1

%ariable costing (a) %ariable (b) bsorption (b) bsorption costing (b) (ompute the total cost of finished goods inventory using variable costing and absorption costing. (Omit the "$" sign in your response.) %ariable (osting :otal cost

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Requirement 2:  ssume that the company wishes to prepare financial statements for the year to issue to its stocA;holders. (a) Is the >+5,000 figure for &inished 4oods inventory the correct amount to use on these statements for external reporting purposes1 (a) 200,000 per year in fixed expenses and >2 per unit sold in variable expenses. :he company's >* per unit product cost given above is computed as follows#

-irect materials

> *0

-irect labor



%ariable %ariable manufacturing overhead



&ixed manufacturing overhead >50,000 D 50,000 units"

5

$nit $nit prod produc uctt cost cost

> *

Requirement 1: !edo the company's income statement in the contribution format using variable costing. (Omit the "$" sign in your response.)

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Variable expenses:

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(ontribution margin

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Fixed expenses:

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Requirement 2: !econcile any difference between the net operating income on your variable costing income statement and the net operati operating ng income income on the absorp absorptio tion n costin costing g income income stateme statement nt above. above. (Om (Omit it the "$" sign in yo your  ur  response.)

%ariable costing net operating income loss"  ))))))))))# &ixed manufacturing overhead cost deferred  bsorption costing net operating income loss"

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