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Do Homework- Taiwo Onigbinde- Google Chrome Secure https://www.math com Student PlayerHomework asp ? h o ld-459826 138 uesti ld-78f shed fiseBld 2n2derter y es Cost Accounting Fall 2017 Taiwo Onigbinde 12/21/17 5:38 AM u Homework: HW 11/2 due 11/7 Save Score: 0 of 25 pts 7 of 8 (6 complete) HW Score: 50%, 50 of 100 pts E9-32 (similar to) Question Help | * The Donaldson Company uses an absorption-costing system based on standard costs. Variable manufacturing cost consists of direct material cost of $3 00 per unit and other variable manufacturing costs of $1.60 per unit. The standard production rate is 10 units per machine-hour. Total budgeted and actual fixed manufacturing overhead costs are $480,000. Fixed manufacturing overhead is allocated at $8 per machine-hour based on fixed manufacturing costs of $480,000/ 60,000 machine-hours, which is the level Donaldson uses as its denominator level. The selling price is $7 per unit. Variable operating (nonmanufacturing) cost, which is driven by units sold, is $1 per unit. Fixed operating (nonmanufacturing) costs are $55,000. Beginning inventory in 2017 is 40,000 units; ending inventory is 45,000 units. Sales in 2017 are 535,000 units. The same standard unit costs persisted throughout 2016 and 2017. For simplicity, assume that there are no price, spending, or efficiency variances st Read the requirements Requirement 1. Prepare an income statement for 2017 assuming that the production-volume variance is written off at year-end as an adjustment to cost of goods sold Complete the top half of the income statement first, then complete the bottom portion. (Label the variance as favorable (F) or unfavorable (U)) Absorption costing 3745000

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Solution:

Revenues (535,000 x $7) 3745000 Cost of goods sold: Beginning inventory (40,000 x $3.80a) 152000 Variable manufacturing costs (540,000 x $3) 1620000 Fixed manufacturing costs (540,000 x $0.80) 432000 Cost of goods available for sale 2204000 Deduct ending inventory (45,000 x $3.80) 171000 Cost of goods sold: 2033000 Gross margin 1712000 Deduct adjustment for variances (60,000b x $0.80) 48000 Gross margin 1664000 Operating costs Variable operating costs (535,000 x $1 535000 Fixed operating costs 55000 Adjustment for variances 0 Total operating costs 590000 Operating income 1074000 a.$3 + (8/10) = $3 + $0.80 = $3.80 b. [(10 x 60,000) - 540,000] = 60000

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