-15 Toinology.A number of terms are listed below absorption costing theoretical

Question

-15 Toinology.A number of terms are listed below absorption costing theoretical capacity normal capacity non-productive idle capecityoff-limits idle capacity super-variable costing practical copacity master budget capacity Required Select the terms from the above list to complete the following sentences When the full costs of production are included this is called more appropriate to use either variable costing or to include only direct materials called throughput or but it is sometimes . The two types of demand capacity that can be used in the denominator to calcu- or short-term demand called late a unitized fixed-cost rate are long-term demand The only acceptable measure for CRA is S while the only The two supply side steea ASPE/IFRS compliant measure to value inventory and COGS is measures that may be used in the denominator to calculate a unitized fixed-cost rate are long-term mea- sures. The first is unrealistic and excludes any allowance for sure called It is a 24/7/365 mea- The second includes allowance for scheduled maintenance but not for 9-16 Variable and absorption costing: explaining operating-income differences. TC M and sells motor vehicles, and uses standard costing. Actual data relating to April and May 2015 are LO April May Unit data: Beginning inventory 150 400 520 500 Sales Variable costs: 350 10,000 10,000 Manufacturing cost per unit produced Operating (marketing) cost per unit sold Fixed costs Manufacturing costs Operating fmarketing) costs $2.000,000 $2,000,000 600,000$600,000 The selling price per vehicle is $24,000. The budgeted level of production used to calculate the budgeted foxed manufacturing tion-volume variance is written off to cost of goods sold in the month in which it occurs cost per unit is 500 units. There are no price, efficiency, or rate variances. Any produc 1. Prepare Aprl and May 2015 statements of comprehensive income for TC Motors under tal veriable costing and fb) absorption costing 2. Prepare a numerical reconciliaton and exolenation of the difference between operating income for each month under variable costing and absorption costing

Explanation / Answer

Answer 1. Income Statement Under Variable Costing Apr-2015 May-2015 Sales    8,400,000.00    12,480,000.00 Variable Costs: Beginning Inventory                            -      1,500,000.00 Variable Manufacturing Costs      5,000,000.00    4,000,000.00 Cost of Goods Available For Sale      5,000,000.00    5,500,000.00 Less: Ending Inventory    (1,500,000.00)     (300,000.00) Variable Cost of Goods Sold      3,500,000.00    5,200,000.00 Variable Operating Costs      1,050,000.00    1,560,000.00 Total Variable Costs    4,550,000.00      6,760,000.00 Contribution Margin    3,850,000.00      5,720,000.00 Fixed Costs Fixed Manufacturing Cost      2,000,000.00    2,000,000.00 Fixed Operating Costs          600,000.00        600,000.00 Total Fixed Costs    2,600,000.00      2,600,000.00 Operating Income    1,250,000.00      3,120,000.00 Sales Apr - $24,000 X 350 Units      8,400,000.00 May - $24,000 X 520 Units    12,480,000.00 Variable Manufacturing Costs Apr - 500 Units X $10,000      5,000,000.00 May - 400 Units X $10,000      4,000,000.00 Ending Inventory Apr - 150 Units X $10,000      1,500,000.00 May - 30 Units X $10,000          300,000.00 Income Statement Under Absorption Costing Apr-2015 May-2015 Sales    8,400,000.00    12,480,000.00 Variable Costs: Beginning Inventory                            -      2,100,000.00 Variable Manufacturing Costs      5,000,000.00    4,000,000.00 Allocated Fixed Manufacturing Costs      2,000,000.00    1,600,000.00 Cost of Goods Available For Sale      7,000,000.00    7,700,000.00 Less: Ending Inventory    (2,100,000.00)     (420,000.00) Adjustment for Production Volume Variance                            -          400,000.00 Cost of Goods Sold    4,900,000.00      7,680,000.00 Gross Margin    3,500,000.00      4,800,000.00 Operating Costs Variable Operating Costs      1,050,000.00    1,560,000.00 Fixed Operating Costs          600,000.00        600,000.00 Total Operating Costs    1,650,000.00      2,160,000.00 Operating Income    1,850,000.00      2,640,000.00 Allocated Fixed Manufacturing Costs Apr - 500 Units X $4,000      2,000,000.00 May - 400 Units X $4,000      1,600,000.00 Ending Inventory Apr - 150 Units X $14,000      2,100,000.00 May - 30 Units X $14,000          420,000.00 Production Volume Variance Apr - $2,000,000 - $2,000,000                            -   May - $2,000,000 - $1,600,000          400,000.00 (U) Answer 2. Reconciliation Statement Apr-2015 May-2015 Variable Costing Operating Income (Loss)      1,250,000.00    3,120,000.00 Add: Fixed MOH deferred in Ending inventory Under Absorption Costing          600,000.00        120,000.00 Less: Fixed MOH included in Beginning inventory Under Absorption Costing                            -       (600,000.00) Absorption Costing Operating Income (Loss)      1,850,000.00    2,640,000.00 Fixed MOH deferred in inventory Under Absorption Costing April - 150 Units X $4,000          600,000.00 May - 30 Units X $4,000          120,000.00

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