s People Window Help e.php/328938/mod_ resource e/content/3/Handout %20Problem 9
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s People Window Help e.php/328938/mod_ resource e/content/3/Handout %20Problem 962007.pdf Killdeer Company manufactures and sells a single product with the following data. KILLDEER COMPANY Selling Price Variable Manufacturing Costs (direct materials and direct labor) Fixed Manufacturing Costs (manufacturing overhead, based on normal SALES AND PRODUCTION INFORMATION FOR ITS SINGLE PRODUCT S 5.00 per unit 3.00 per unit capacity of 100,000 units per month) 1.00 per unit Marketing and Administrative Costs (all fixed) 50,000 per month Estimated and actual fixed manufacturing costs were equal for the year. Beginning inventory was 30,000 units valued at $4.00 per unit under full absorption costing and at $3.00 under variable costing. Assume that the company uses a FIFO inventory cost flow assumption and actual costs The president of Killdeer wants an analysis on the effect of variations in sales and production units. To help you, he has included a chart (attached) for you to cemplete for three given situations for a particular month (all numbers are in thousands). Complete the attached schedules using the information provided. Round all calculations to the nearest whole thousand dollars. Write a short report to the president of Killdeer that explains how the relation between units sold and units produced affects profits REQUIRED: (I) (2)Explanation / Answer
1) Attached schedule is prepared as follows
Killdear Company
Income Statement-Full Absorption costing
For one month (All no. in thousand)
Workings:-
a) Total amounts for ending inventory and beginning inventory is calculated by multiplying respective units by $4 (full absorption cost per unit). Cost of goods manufactured is calculated by multiplying units produced by $4.
Killdear Company
Income Statement-Variable costing
For one month (All no. in thousand)
Workings:-
b) Total amounts for ending inventory and beginning inventory is calculated by multiplying respective units by $3 (variable cost per unit). Cost of goods manufactured is calculated by multiplying units produced by $3.
Particulars Situation 1 Situation 2 Situation 3 Units Information: Beginning Inventory (A) 30 30 30 Production (B) 100 80 110 Sales (C) 100 100 100 Ending Inventory (A+B-C) 30 10 40 Sales (100 units*$5) (1) 500 500 500 Cost of goods sold: Beginning Inventory (30 units*$4) (D) 120 120 120 Cost of goods manufactured ($4) (E) 400 320 440 Cost of goods available for sale (F = D+E) 520 440 560 Less: Ending Inventory ($4 per unit) (G) (120) (40) (160) Cost of goods sold (2 = F-G) 400 400 400 Gross Margin from Sales (1-2) 100 100 100 Less: Marketing and Administrative costs (50) (50) (50) Operating Income 50 50 50Related Questions
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