1. ABC Company uses absorption costing in its GAAP financial statements and variable costing for its internal management reporting. .ABC Company has produced 20,000 cell phone covers in 2016, but only sold 18,000 cell phone covers. ABC Company had no beginning inventory and now has ending inventory of 2,000 cell phone covers. Which of the following are true?
A. ABC Company will report higher income in its absorption income statement than in its variable income statement.
B. ABC Company will report lower income in its absorption income statement than in its variable income statement.
C. ABC Company will report the same income in its absorption and variable income statements.
D. There is not enough information to know how absorption and variable costing income will compare.
2. Budgeted sales in Allen Company are given below:
April
May
Budgeted Cash Sales
$50,000
$40,000
Budgeted Credit Sales
$130,000
$90,000
Total Budgeted Sales
$180,000
$120,000
Collections for sales on account follow a stable pattern as follows:
· 70% of a month's credit sales are collected in the month of sale and
· 30% are collected in the month following sale.
Given these data, the total of all collections for May should be:
A. $99,000
B. $107,000
C. $142,000
D. $178,000
3. XYZ Company sells goods to its customers on account and collects from customers evenly over 90 days. About 2% of the payments are written off as uncollectible each month. To forecast cash collections for its Cash Collections Budget for May, what information is needed?
A. The amount of sales expected in June
B. The amount of sales expected in March
C. The amount of production expected in June
D. The amount of production expected in March
4. ABC Company pays its suppliers for 60% of its purchases in the period of purchase and 40% in the following quarter. Accounts payable at the beginning of the year was $30,000.
Quarter 1, 2014
Quarter 2, 2014
Quarter 3, 2014
Quarter 4, 2014
Annual, 2014
Purchases on Account
$10,000
$20,000
$40,000
$100,000
$170,000
Based on the information above, what is the balance of accounts payable at the end of the year?
A. $40,000
B. $68,000
C. $58,000
D. $42,000
1. ABC Company uses absorption costing in its GAAP financial statements and variable costing for its internal management reporting. .ABC Company has produced 20,000 cell phone covers in 2016, but only sold 18,000 cell phone covers. ABC Company had no beginning inventory and now has ending inventory of 2,000 cell phone covers. Which of the following are true?
A. ABC Company will report higher income in its absorption income statement than in its variable income statement.
B. ABC Company will report lower income in its absorption income statement than in its variable income statement.
C. ABC Company will report the same income in its absorption and variable income statements.
D. There is not enough information to know how absorption and variable costing income will compare.
2. Budgeted sales in Allen Company are given below:
| April | May | |
| Budgeted Cash Sales | $50,000 | $40,000 |
| Budgeted Credit Sales | $130,000 | $90,000 |
| Total Budgeted Sales | $180,000 | $120,000 |
Collections for sales on account follow a stable pattern as follows:
· 70% of a month's credit sales are collected in the month of sale and
· 30% are collected in the month following sale.
Given these data, the total of all collections for May should be:
A. $99,000
B. $107,000
C. $142,000
D. $178,000
3. XYZ Company sells goods to its customers on account and collects from customers evenly over 90 days. About 2% of the payments are written off as uncollectible each month. To forecast cash collections for its Cash Collections Budget for May, what information is needed?
A. The amount of sales expected in June
B. The amount of sales expected in March
C. The amount of production expected in June
D. The amount of production expected in March
4. ABC Company pays its suppliers for 60% of its purchases in the period of purchase and 40% in the following quarter. Accounts payable at the beginning of the year was $30,000.
| Quarter 1, 2014 | Quarter 2, 2014 | Quarter 3, 2014 | Quarter 4, 2014 | Annual, 2014 | |
| Purchases on Account | $10,000 | $20,000 | $40,000 | $100,000 | $170,000 |
Based on the information above, what is the balance of accounts payable at the end of the year?
A. $40,000
B. $68,000
C. $58,000
D. $42,000
Related questions
Blazer Chemical produces and sells an ice-melting granular used on roadways and sidewalks in winter. It annually produces and sells about 100 tons of its granular. In its nine-year history, the company has never reported a net loss. However, because of this year's unusually mild winter, projected demand for its product is only 60 tons. Based on its predicted production and sales of 60 tons, the company projects the following income statement (under absorption costing).
| Sales (60 tons at $20,500 per ton) | $ | 1,230,000 | |||
| Cost of goods sold (60 tons at $15,500 per ton) | 930,000 | ||||
| Gross margin | 300,000 | ||||
| Selling and administrative expenses | 319,200 | ||||
| Net loss | $ | (19,200 | ) | ||
Its product cost information follows and consists mainly of fixed cost because of its automated production process requiring expensive equipment.
| Variable direct labor and material costs per ton | $ | 3,167 | |
| Fixed cost per ton ($740,000 ÷ 60 tons) | 12,333 | ||
| Total product cost per ton | $ | 15,500 | |
Selling and administrative expenses consist of variable selling and administrative expenses of $320 per ton and fixed selling and administrative expenses of $300,000 per year. The company's president is concerned about the adverse reaction from its creditors and shareholders if the projected net loss is reported. The operations manager mentions that since the company has large storage capacity, it can report a net income by keeping its production at the usual 100-ton level even though it expects to sell only 60 tons. The president was puzzled by the suggestion that the company can report income by producing more without increasing sales.
Required:
1. Can the company report a net income by increasing production to 100 tons and storing the excess production in inventory? Complete the following income statement (using absorption costing) based on production of 100 tons and sales of 60 tons. (Round your answers to the nearest whole dollar.)
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| Outback, Ltd., manufactures tactical LED flashlights in Melbourne, Australia. The firm uses an absorption-costing system for internal reporting purposes; however, the company is considering using variable costing. Data regarding planned and actual operations for 20x4 follow: |
|
| Budgeted Costs | ||||||||
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| |||||||||
| Per Unit | Total | Actual Costs | |||||||
| Direct material | $ | 12.20 | $ | 1,634,800 | $ | 1,512,800 | |||
| Direct labor | 9.30 | 1,246,200 | 1,153,200 | ||||||
| Variable manufacturing overhead | 4.30 | 576,200 | 533,200 | ||||||
| Fixed manufacturing overhead | 4.50 | 603,000 | 613,000 | ||||||
| Variable selling expenses | 7.50 | 1,005,000 | 877,500 | ||||||
| Fixed selling expenses | 7.80 | 1,045,200 | 1,045,200 | ||||||
| Variable administrative expenses | 2.80 | 375,200 | 327,600 | ||||||
| Fixed administrative expenses | 2.80 | 375,200 | 384,200 | ||||||
|
| |||||||||
| Total | $ | 51.20 | $ | 6,860,800 | $ | 6,446,700 | |||
|
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| Planned Activity | Actual Activity | |||
| Sales in units | 134,000 | 117,000 | ||
| Production in units | 134,000 | 124,000 | ||
| Beginning finished-goods inventory in units | 43,000 | 43,000 | ||
| The budgeted per-unit cost figures were based on the company producing and selling 134,000 units in 20x4. Outback uses a predetermined overhead rate for applying manufacturing overhead to its product. A total manufacturing overhead rate of $8.80 per unit was employed for absorption costing purposes in 20x4. Any overapplied or underapplied manufacturing overhead is closed to the Cost of Goods Sold account at the end of the year. The 20x4 beginning finished-goods inventory for absorption costing purposes was valued at the 20x3 budgeted unit manufacturing cost, which was the same as the 20x4 budgeted unit manufacturing cost. There are no work-in-process inventories at either the beginning or the end of the year. The planned and actual unit selling price for 20x4 was $72.00 per unit. |
| Required: |
| 1. | Compute the value of Outbackâs 20x4 ending finished-goods inventory under absorption costing. (Do not round intermediate calculations.) |
| 2. | Compute the value of Outbackâs 20x4 ending finished-goods inventory under variable costing. (Do not round intermediate calculations.) |
| 3. | Compute the difference between Outbackâs 20x4 reported operating income calculated under absorption costing and calculated under variable costing. (Do not round intermediate calculations.) |
