Problem 2 Input values Solve the given problem based on the following informatio

Question

Problem 2 Input values Solve the given problem based on the following information. Company name Conglomco Scenario Table 1 Conglomco Income Statement Under Absorption Costing Conglomco Income Statement Under Absorption Costing 2011 ($) 2012 ($) 2011 ($) 2012 ($) Sales ($45 per unit)    900,000 1,800,000 Sales ($45 per unit) 900,000 1,800,000 Cost of goods sold ($31 per unit)    620,000 1,240,000 Cost of goods sold ($31 per unit) 620,000 1,240,000 Gross margin    280,000      560,000 Gross margin 280,000      560,000 Selling and administrative expenses    290,000      340,000 Selling and administrative expenses 290,000      340,000 Net income/loss     (10,000)      220,000 Net income/loss (10,000)      220,000 Scenario Table 2 Selling price $45 per unit Units Produced and Sold COGS $31 per unit 2011 2012 Variable selling and administrative cost $2.50 per unit Units produced 30,000      30,000 Units sold 20,000      40,000 Units Produced and Sold ·      During 2011 and 2012, the variable cost per unit stayed the same. 2011 2012 ·      During 2011 and 2012, the total fixed costs stayed the same. Units produced        30,000       30,000 TRUE Units sold        20,000       40,000 Scenario Table 3 Per Unit Product Cost Direct materials $5 Direct labor $9 Variable overhead $7 Fixed overhead $300,000 Fixed overhead ($300,000 / 30,000 units) $10 Total product cost per unit $31 Per Unit Product Cost Scenario Table 4 Direct materials $5 Sales and Administrative Expense Direct labor $9 2011 ($) 2012 ($) Variable overhead $7 Variable selling and administrative ($2.50 per unit)        50,000      100,000 Fixed overhead ($300,000 / 30,000 units) $10 Fixed selling and administrative      240,000      240,000 Total product cost per unit $31 Total selling and administrative      290,000      340,000 Reconcile the variable costing income to the absorption costing income for these two years. Sales and Administrative Expense 2011 ($) 2012 ($) Reconciliation of Variable Costing Income to Absorption Costing Income Variable selling and administrative ($2.50 per unit)    50,000      100,000 2011 ($) 2012 ($) Fixed selling and administrative 240,000      240,000 Variable costing income ? ? Total selling and administrative 290,000      340,000 Fixed overhead in ending inventory ? ? Fixed overhead in beginning inventory ? ? Absorption costing income ? ? Problem 2 Input values Solve the given problem based on the following information. Company name Conglomco Scenario Table 1 Conglomco Income Statement Under Absorption Costing Conglomco Income Statement Under Absorption Costing 2011 ($) 2012 ($) 2011 ($) 2012 ($) Sales ($45 per unit)    900,000 1,800,000 Sales ($45 per unit) 900,000 1,800,000 Cost of goods sold ($31 per unit)    620,000 1,240,000 Cost of goods sold ($31 per unit) 620,000 1,240,000 Gross margin    280,000      560,000 Gross margin 280,000      560,000 Selling and administrative expenses    290,000      340,000 Selling and administrative expenses 290,000      340,000 Net income/loss     (10,000)      220,000 Net income/loss (10,000)      220,000 Scenario Table 2 Selling price $45 per unit Units Produced and Sold COGS $31 per unit 2011 2012 Variable selling and administrative cost $2.50 per unit Units produced 30,000      30,000 Units sold 20,000      40,000 Units Produced and Sold ·      During 2011 and 2012, the variable cost per unit stayed the same. 2011 2012 ·      During 2011 and 2012, the total fixed costs stayed the same. Units produced        30,000       30,000 TRUE Units sold        20,000       40,000 Scenario Table 3 Per Unit Product Cost Direct materials $5 Direct labor $9 Variable overhead $7 Fixed overhead $300,000 Fixed overhead ($300,000 / 30,000 units) $10 Total product cost per unit $31 Per Unit Product Cost Scenario Table 4 Direct materials $5 Sales and Administrative Expense Direct labor $9 2011 ($) 2012 ($) Variable overhead $7 Variable selling and administrative ($2.50 per unit)        50,000      100,000 Fixed overhead ($300,000 / 30,000 units) $10 Fixed selling and administrative      240,000      240,000 Total product cost per unit $31 Total selling and administrative      290,000      340,000 Reconcile the variable costing income to the absorption costing income for these two years. Sales and Administrative Expense 2011 ($) 2012 ($) Reconciliation of Variable Costing Income to Absorption Costing Income Variable selling and administrative ($2.50 per unit)    50,000      100,000 2011 ($) 2012 ($) Fixed selling and administrative 240,000      240,000 Variable costing income ? ? Total selling and administrative 290,000      340,000 Fixed overhead in ending inventory ? ? Fixed overhead in beginning inventory ? ? Absorption costing income ? ?

Explanation / Answer

Preparation of Variable costing Income statement for 2011 and 2012 2011 2012 Sales $900,000 $1,800,000 Less : Variable Production costs ($21 per unit) $420,000 $840,000 Less : Variable selling and admin costs $50,000 $100,000 Contribution Margin $430,000 $860,000 Less : Fixed Manufacturing overheads $300,000 $300,000 Less : Fixed selling & admin costs $240,000 $240,000 Net Income -$110,000 $320,000 Reconciliation of Variable Costing Income to Absorption Costing Income Variable costing Income -$110,000 $320,000 Add : Fixed Overhead in ending Inventory $100,000 $0 Less : Fixed Overhead in beginning Inventory $0 $100,000 Absorption costing income -$10,000 $220,000

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