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Accounting (51)
ACCTG322 (11)
Chapter 88-1

Chapter 8 8-1 and 8-2_solutions.pdf

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Department
Accounting
Course
ACCTG322
Professor
Trish Stringer
Semester
Winter

Description
Opening Inventory - Production 25,000 Sales 20,000 Ending Inventory 5,000 Per unit cost: Absorption Variable DM, DL, VOH 10 10 FOH (150,000 / 25,000) 6 16 10 Harvey Company - Example 1, Year 1 Absorption costing operating income Sales $ 30 20,000 $ 600,000 Less: COGS Opening inventory $ - add: COGM $ 16 25,000 $ 400,000 Goods available for sale $ 400,000 less: ending inventory $ 16 5,000 $ 80,000 $ 320,000 Gross margin $ 280,000 Selling & admin expenses Variable $ 3 20,000 $ 60,000 Fixed $ 100,000 $ 160,000 Operating income $ 120,000 Harvey Company - Example 1, Year 1 Variable costing operating income Sales $ 30 20,000 $ 600,000 Less: variable expenses Opening inventory $ - add: COGM $ 10 25,000 $ 250,000 Goods available for sale $ 250,000 less: ending inventory $ 10 5,000 $ 50,000 variable COGS $ 200,000 variable selling & admin $ 3 20,000 $ 60,000 $ 260,000 Contribution margin $ 340,000 Fixed expenses Manufacturing overhead $ 150,000 Selling & admin expenses $ 100,000 $ 250,000 Operating income $ 90,000 Harvey Company Ex1 Yr1 soln Page 1 of 10 Harvey Company - Example 1, Year 1 Reconciliation Variable costing operating income $ 90,000 Add: FOH in ending inventory 30,000 Less: FOH in opening inventory - Absorption costing operating income $ 120,000 Harvey Company Ex1 Yr1 soln Page 2 of 10 Opening Inventory 5,000 Production 25,000 Sales 30,000 Ending Inventory - Per unit cost: Absorption Variable DM, DL, VOH 10 10 FOH (150,000 / 25,000) 6 16 10 Harvey Company - Example 1, Year 2 Absorption costing operating income Sales $ 30 30,000 $ 900,000 Less: COGS Opening inventory $ 16 5,000 $ 80,000 add: COGM $ 16 25,000 $ 400,000 Goods available for sale $ 480,000 less: ending inventory $ 16 - $ - $ 480,000 Gross margin $ 420,000 Selling & admin expenses Variable $ 3 30,000 $ 90,000 Fixed $ 100,000 $ 190,000 Operating income $ 230,000 Harvey Company - Example 1, Year 2 Variable costing operating income Sales $ 30 30,000 $ 900,000 Less: variable expenses Opening inventory $ 10 5,000 $ 50,000 add: COGM $ 10 25,000 $ 250,000 Goods available for sale $ 300,000 less: ending inventory $ 10 - $ - variable COGS $ 300,000 variable selling & admin $ 3 30,000 $ 90,000 $ 390,000 Contribution margin $ 510,000 Fixed expenses Manufacturing overhead $ 150,000 Selling & admin expenses $ 100,000 $ 250,000 Operating income $ 260,000 Harvey Company Ex1 Yr2 soln Page 3 of 10 Harvey Company - Example 1, Year 2 Reconciliation Variable costing operating income $ 260,000 Add: FOH in ending inventory - Less: FOH in opening inventory - 30,000 Absorption costing operating income $ 230,000 Harvey Company Ex1 Yr2 soln Page 4 of 10 Opening Inventory - Production 30,000 Sales 25,000 Ending Inventory 5,000 Per unit cost: Absorption Variable DM, DL, VOH 10 10 FOH (150,000 / 30,000) 5 15 10 Inverness Company - Example 2, Year 1 Absorption costing operating income Sales $ 30 25,000 $ 750,000 Less: COGS Opening inventory $ 15 - $ - add: COGM $ 15 30,000 $ 450,000 Goods available for sale $ 450,000 less: ending inventory $ 15 5,000 $ 75,000 $ 375,000 Gross margin $ 375,000 Selling & admin expenses Variable $ 3 25,000 $ 75,000 Fixed $ 100,000 $ 175,000 Operating income $ 200,000 Inverness Company - Example 2, Year 1 Variable costing operating income Sales $ 30 25,000 $ 750,000 Less: variable expenses Opening inventory $ 10 - $
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