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QS08 - Class Exercises Solution

This document provides solutions to accounting exercises involving variable and absorption costing methods. It includes four examples of companies (Fowler Co., Mafli Company, Leibson Co., and Qiu Company) and calculates unit product costs, income statements, and reconciliations under both variable and absorption costing for each example. Variable costing uses only variable costs while absorption costing also allocates fixed manufacturing overhead costs. The examples show how to prepare contribution format income statements under variable costing and traditional format statements under absorption costing, then reconcile the net operating incomes between the two methods.

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821 views5 pages

QS08 - Class Exercises Solution

This document provides solutions to accounting exercises involving variable and absorption costing methods. It includes four examples of companies (Fowler Co., Mafli Company, Leibson Co., and Qiu Company) and calculates unit product costs, income statements, and reconciliations under both variable and absorption costing for each example. Variable costing uses only variable costs while absorption costing also allocates fixed manufacturing overhead costs. The examples show how to prepare contribution format income statements under variable costing and traditional format statements under absorption costing, then reconcile the net operating incomes between the two methods.

Uploaded by

lyk0tex
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Accounting 225 Quiz Section #8

Chapter 6-1 Class Exercises Solution


1. Fowler Co. manufactures a single product. Operating data for the company and its absorption
costing income statements for the last two years are presented below:

Variable manufacturing costs are $6 per unit.


Fixed manufacturing overhead totals $72,000 in each year. This overhead is applied at the
rate of $4 per unit.
Variable selling and administrative expenses are $2 per unit sold.

a) What was the unit product cost in each year under variable costing?
The manufacturing cost of $6 per unit is the unit product cost under variable costing in both
years.
b) Prepare new income statements for each year using variable costing.

c) Reconcile the absorption costing and variable costing net operating income for each year.

Accounting 225 Quiz Section #8


Chapter 6-1 Class Exercises Solution
2. Mafli Company, which has only one product, has provided the following data concerning its
most recent month of operations:

a) What is the unit product cost for the month under variable costing?
Variable Costing = Direct Materials + Direct Labor + Variable MOH
= 26 + 37 + 5 = $68

b) What is the unit product cost for the month under absorption costing?
Absorption Costing = Direct Materials + Direct Labor + Variable MOH + Fixed MOH
= 26 + 37 + 5 + 5= $73

c) Prepare a contribution format income statement for the month using variable costing.

d) Prepare a traditional format income statement for the month using absorption costing.

Accounting 225 Quiz Section #8


Chapter 6-1 Class Exercises Solution
e) Reconcile the absorption costing and variable costing net operating income for the month.

3. Leibson Co, which has only one product, has provided the following data concerning its most
recent month of operations:

a) What is the unit product cost for the month under variable costing?
Variable Costing = Direct Materials + Direct Labor + Variable MOH
= 41 + 28 + 3 = $72
b) What is the unit product cost for the month under absorption costing?
Absorption Costing = Direct Materials + Direct Labor + Variable MOH + Fixed MOH
= 41 + 28 + 3 + 7 = $79
c) Prepare a contribution format income statement for the month using variable costing.

Accounting 225 Quiz Section #8


Chapter 6-1 Class Exercises Solution
d) repare a traditional format income statement for the month using absorption costing.

e) Reconcile the absorption costing and variable costing net operating income for the month.

4. Qiu Company, which has only one product, has provided the following data concerning its
most recent month of operations:

a) What is the unit product cost for the month under variable costing?
Variable Costing = Direct Materials + Direct Labor + Variable MOH
= 31 + 37 + 2 = $70
b) Prepare a contribution format income statement for the month using variable costing.
Sales
Variable Expenses
Variable COGS
Variable S&A
Contribution Margin
Fixed Expenses
Fixed MOH
Fixed S&A
Net Operation Income

374,400

($117 x 3200)

(224,000)
(22,400)
128,000

($70 x 3200)
($7 x 3200)

(112,200)
(6,400)
9,400
4

Accounting 225 Quiz Section #8


Chapter 6-1 Class Exercises Solution
c) Without preparing an income statement, determine the absorption costing net operating
income for the month.
Variable Net Operating Income
Add: Deferred MOH
Absorption Net Operating Income

9,400
3,400 ($34 x 100 units)
12,800

FMOH/unit = 112,200/3,300 = $34 per unit

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