DeAnne Company produces a single product. The company\'s variable costing income

Question

DeAnne Company produces a single product. The company's variable costing income statement for August appears below:

84,000

462,000

336,000

37,000

$188,000

    
The company produced 37,000 units in August and the beginning inventory consisted of 10,000 units. Variable production costs per unit and total fixed costs have remained constant over the past several months.

The value of the company's inventory on August 31 under the absorption costing method is (Do not round your intermediate calculations.):

$74,405

$45,000

$60,000

$70,000

(Ignore income taxes in this problem.) Lichty Car Wash has some equipment that needs to be rebuilt or replaced. The following information has been gathered concerning this decision:

Lichty uses the total-cost approach and a discount rate of 12% in making capital budgeting decisions. Regardless of which option is chosen, rebuild or replace, at the end of four years Mr. Lichty plans to close the car wash and retire.

If the new equipment is purchased, the present value of the annual cash operating costs associated with this alternative is: (Round your 'PV factors' to three decimal places. Round your other intermediate calculations and final answer to the nearest whole dollar.) (Use Exhibit11b-1, Exhibit11b-2)

$(38,570)

$(23,689)

$(20,955)

$(53,451)

(Ignore income taxes in this problem.) Sam Weller is thinking of investing $72,000 to start a bookstore. Sam plans to withdraw $16,000 from the business at the end of each year for the next four years. At the end of the fourth year, Sam plans to sell the business for $111,000 cash. At a 11% discount rate, what is the net present value of the investment? (Round your 'PV factors' to three decimal places.) (Use Exhibit11b-1, Exhibit11b-2)

$49,632

$73,149

$50,781

$72,000

DeAnne Company
Income statement
For the month ended August 31   Sales ($19 per unit) $798,000   Variable expenses:      Variable cost of goods sold 378,000      Variable selling expense

84,000

  Total variable expenses

462,000

  Contribution margin

336,000

  Fixed expenses:      Fixed manufacturing 111,000      Fixed selling and administrative

37,000

  Total fixed expenses 148,000   Net operating income

$188,000

Explanation / Answer

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2)

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3).

1). Answer: $60,000 Particulars Amount Workings No. of units sold during the year     42,000 ($798,000 / $19) Variable cost per unit $9 ($378,000 /42,000) Total fixed manufacturing cost $111,000 Total fixed manufacturing cost per unit $3 ($111,000 / 37,000) Total cost per unit under absorption costing $12 ($9 + $3) Calculation of ending inventory Beginning inventory 10,000 Add: No. of units produced during the year 37,000 47,000 Less:No. of units sold during the year 42,000 Ending inventory 5,000 Value of company's ending inventory under absorption costing $60,000 (5,000 × $12)

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