HROB 2100 Study Guide - Final Guide: Payback Period, Net Present Value, Economic Value Added

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fuchsiamink298

5 Apr 2017

School

University of Guelph

Department

Human Resources and Organizational Behaviour

Course

HROB 2100

Professor

All

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Document Summary

Absorption costing: absorption costing treats all manufacturing costs as product costs (whether fixed or variable) Unit product cost = direct material + direct labour + fixed overhead + variable overhead. Variable costing: a costing method hat includes only variable manufacturing costs (dm. + dl + voh) in the unit cost of product also, called direct costing, but this is not used very often fixed overhead is treated ass a period cost, like selling and administrative expenses. Absorption costing: product costs = dm, dl, voh, foh period costs = sg & a. Variable costing: product costs = dm, dl, voh period costs - foh, sg & a. In absorption costing if there is an ending inventory foh cost associated with that inventory are carried forward. Fixed manufacturing overhead cost deferred in inventory: the portion of the foh of a period that goes into inventory under the absorption costing method as a result of production exceeding sales.

Related Questions

Absorption and Variable Costing Comparisons Peachtree Companymanufactures peach jam. Because of bad weather, its peach crop wassmall. The following data have been gathered for the summer quarterof 2014: Beginning inventory (cases) 0 Cases produced 9,000 Casessold 8,200 Sales price per case $ 60 Direct materials per case $ 8Direct labor per case $ 9 Variable manufacturing overhead per case$ 3 Total fixed manufacturing overhead $ 320,000 Variable sellingand administrative cost per case $ 2 Fixed selling andadministrative cost $ 48,000 (a) Prepare a functional incomestatement for the quarter using absorption costing. (Round answersto the nearest dollar. Do not use negative signs with your answers,EXCEPT if you calculate a net loss.) Peachtree Company Functional(Absorption Costing) Income Statement For the Summer Quarter 2014Sales $Answer Cost of goods sold: Variable costs $Answer Fixedcosts Answer Goods available Answer Ending inventory Answer AnswerGross profit Answer Operating expenses: Variable selling andadministrative $Answer Fixed selling and administrative AnswerAnswer Net income (loss) $Answer (b) Prepare a contribution incomestatement for the quarter using variable costing. (Do not usenegative signs with your answers, EXCEPT if you calculate a netloss.) Peachtree Company Contribution (Variable Costing) IncomeStatement For the Summer Quarter 2014 Sales $Answer Variableexpenses: Manufacturing $Answer Selling and administrative AnswerAnswer Contribution margin Answer Fixed expenses: Manufacturingoverhead $Answer Selling and administrative Answer Answer Netincome (loss) $Answer (c) What is the value of ending inventoryunder absorption costing? (Round answer to the nearest wholenumber.) $Answer (d) What is the value of ending inventory undervariable costing? $Answer (e) The difference in the value of endinginventory in parts (c) and (d) is explained by the followingdifference between absorption and variable costing: Variablecosting treats all manufacturing costs as variable costs whileabsorption costing treats only variable manufacturing costs asvariable costs. Absorption costing treats fixed costs as periodcosts while variable costing treats fixed costs as product costs.Variable costing assigns only variable manufacturing costs toproducts while absorption costing assigns both variable and fixedmanufacturing costs to products. Absorption costing treats allmanufacturing costs as period costs while variable costing treatsonly variable manufacturing costs as period costs. Check Next

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QUESTION# 3 Zhou Inc. has the following cost data for its past year of operations. Zhou Inc. produces tables and sells them for $150 each. You must show all your work in order to receive all the points available.

$$/ Per unit

Variable Costs:

Direct Materials (DM) $25

Direct Labour (DL) $20

Variable Mfâg Overhead $ 5

Variable Selling & Admin $10

Total Variable costs $60

Fixed Costs:

Fixed Mfâg Overhead $360,000

Fixed Selling & Admin $200,000

Total Fixed Costs $560,000

Unit data

Beginning Inventory 0

Units produced 12,000

Units sold 10,000

Required:

1) Calculate the unit cost per table under Variable Costing.

2) Calculate the unit cost per table under Absorption Costing.

3) Prepare a Contribution Margin format Income Statement using Variable Costing.

4) Prepare a Traditional format income statement using Absorption Costing.

5) Explain why the operating incomes were not the same under the different cost flow assumptions? And reconcile the difference in operating income.

The Dorset Corporation produces and sells a single product. The following data refer to the year just completed:


Beginning inventory		0
Units produced		34,000
Units sold		25,900
Selling price per unit	$	482
Selling and administrative expenses:
Variable per unit	$	16
Fixed per year	$	362,600
Manufacturing costs:
Direct materials cost per unit	$	240
Direct labor cost per unit	$	56
Variable manufacturing overhead cost per unit	$	34
Fixed manufacturing overhead per year	$	578,000

Assume that direct labor is a variable cost.

Required:

a. Compute the unit product cost under both the absorption costing and variable costing approaches.

b. Prepare an income statement for the year using absorption costing.

c. Prepare an income statement for the year using variable costing.

d. Reconcile the absorption costing and variable costing net operating income figures in (b) and (c) above.

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HROB 2100 Study Guide - Final Guide: Payback Period, Net Present Value, Economic Value Added

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