Individual Assignment-3

Question 1:

Jean Peck's Furniture manufactures tables for hospitality sector. It takes only bulk orders and
each table is sold for $500 after negotiations. In the month of January, it manufactures 3,000
tables and sells 2,600 tables. Actual fixed costs are the same as the amount of fixed costs
budgeted for the month.

The following information is provided for the month of January:

Variable manufacturing costs $140 per unit

Fixed manufacturing costs $90,000 per month
Fixed Administrative expenses $30,000 per month

At the end of the month Jean Peck's Furniture has an ending inventory of finished goods of
400 units. The company also incurs a sales commission of $13 per unit.
What is the operating income when using absorption costing? (Round any intermediary
calculations to the nearest cent and your final answer to the nearest dollar.)

Question 2:
Johnson Realty bought a 2,000-acre island for $10,000,000 and divided it into 200 equal size
lots.
As the lots are sold, they are cleared at an average cost of $5,000.
Storm drains and driveways are installed at an average cost of $8,000 per site.
Sales commissions are 10% of selling price.
Administrative costs are $850,000 per year.
The average selling price was $160,000 per lot during 2017 when 50 lots were sold.

During 2018, the company bought another 2,000-acre island and developed it exactly the
same way. Lot sales in 2018 totaled 300 with an average selling price of $160,000. All costs
were the same as in 2017.

Required:
Prepare income statements for both years using both absorption and variable costing
methods.

Question 3:

The following data are available for Brennan Soft Toys Company for the year ended
September 30, 2017.

Sales: 24,000 units at $50 each

Expected and actual production: 30,000 units
Manufacturing costs incurred:
Variable: $525,000
Fixed: $372,000
Nonmanufacturing costs incurred:
Variable: $144,800
Fixed: $77,400
Beginning inventories: none

Required:
a. Determine operating income using the variable-costing approach.
b. Determine operating income using the absorption-costing approach.
c. Explain why operating income is not the same under the two approaches.
AACSB: Application of knowledge

Question 4:
The following information pertains to the January operating budget for Casey Corporation.

∙ Budgeted sales for January $201,000 and February $101,000.

∙ Collections for sales are 40% in the month of sale and 60% the next month.
∙ Gross margin is 25% of sales.
∙ Administrative costs are $13,000 each month.
∙ Beginning accounts receivable is $25,000.
∙ Beginning inventory is $17,000.
∙ Beginning accounts payable is $73,000. (All from inventory purchases.)
∙ Purchases are paid in full the following month.
∙ Desired ending inventory is 25% of next month's cost of goods sold (COGS).

For January, budgeted cash collections are ________.

Question 5:
The following information pertains to the January operating budget for Casey Corporation.

∙ Budgeted sales for January $200,000 and February $107,000.

∙ Collections for sales are 40% in the month of sale and 60% the next month.
∙ Gross margin is 25% of sales.
∙ Administrative costs are $11,000 each month.
∙ Beginning accounts receivable is $26,000.
∙ Beginning inventory is $15,000.
∙ Beginning accounts payable is $68,000. (All from inventory purchases.)
∙ Purchases are paid in full the following month.
∙ Desired ending inventory is 25% of next month's cost of goods sold (COGS).

For January, budgeted cost of goods sold is ________.

Question 6:
Russell Company has the following projected account balances for June 30, 2018:

Accounts payable $80,000 Sales $1,600,000

Accounts receivable 200,000 Capital stock 800,000
Depreciation, factory 48,000 Retained earnings ?
Inventories (5/31 & 6/30)360,000 Cash 112,000
 Direct materials used 400,000 Equipment, net 480,000
Office salaries 160,000 Buildings, net 800,000
Insurance, factory 8,000 Utilities, factory 32,000
Plant wages 280,000 Selling expenses 120,000
Bonds payable 320,000 Maintenance, factory 56,000

Required:
a. Prepare a budgeted income statement for June 2018

Question 7:
Time Again LLC produces and sells a mantel clock for $100 per unit. In 2017, 41,000 clocks
were produced and 37,000 were sold. Other information for the year includes:

Direct materials $42 per unit

Direct manufacturing labor $7 per unit
Variable manufacturing costs $4.00 per unit
Sales commissions $14.50 per part
Fixed manufacturing costs $64.00 per unit
Administrative expenses, all fixed $38.50 per unit

Question 8:

For 2017, Rockford, Inc., had sales of 150,000 units and production of 200,000 units. Other
information for the year included:

Direct manufacturing labor $197,500

Variable manufacturing overhead 100,000
Direct materials 160,000
Variable selling expenses 100,000
Fixed administrative expenses 100,000
Fixed manufacturing overhead 250,000

There was no beginning inventory.

Required:
a. Compute the ending finished goods inventory under both absorption and variable
costing.

Question 9:

Charlassier Corporation manufactures and sells laptop computers and uses standard costing.
For the month of September there was no beginning inventory, there were 3,000 units
produced and 2,500 units sold. The manufacturing variable cost per unit is $385 and the
variable operating cost per unit was $312.50. The fixed manufacturing cost is $450,000 and
the fixed operating cost is $75,000. The selling price per unit is $925.

Required:
Prepare the income statement for Charlassier Corporation for September under variable
costing.