26. Snow Slope Ski Shop plans to sell the following quantity of snow skis during
ID: 2456449 • Letter: 2
Question
26. Snow Slope Ski Shop plans to sell the following quantity of snow skis during the first four months of 2016:
Snow Slope pays $28 for each pair of skis (a pair equals one unit). The skis sell for $60 per pair.
At the beginning of January, the shop plans to have 125 pairs of skis on hand, and hopes to maintain an ending inventory equal to 25% of next month’s sales.
Required: Prepare a purchases budget for the first quarter of 2016.
11
Units
January
700
February
800
March
900
April
800
27. Absorption Costing vs. Variable Costing
A company manufactures a unique device that is used to boost Wi-Fi signals. The following data relates to the first month of operation:
Beginning inventory 0
Units produced 40,000
Units sold 35,000 Selling price per unit $120 Selling and administrative expenses:
Variable per unit $4
Fixed (total for the month) $1,120,000
Manufacturing costs:
Direct materials cost per unit $30
Direct labor cost per unit $14 Variable manufacturing overhead cost per unit $4
Fixed manufacturing overhead cost $1,280,000
Management is anxious to see the profitability of the newly designed unique booster.
Required:
Calculate unit product cost and prepare income statement under variable costing system and absorption costing system.
Prepare income statement under two costing system.
Prepare a schedule to reconcile the net operating income under variable and absorption
costing system.
Units
January
700
February
800
March
900
April
800
Explanation / Answer
26. Snow Slope Ski Shop plans to sell the following quantity of snow skis during
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