In the long run, all costs are controllable. Is this statement true? Why or why not?
True, all costs are controllable in the long run.
Cost that can be controlled by organization is known as controllable cost. It includes both variable and fixed cost.
All costs are controllable in the long run. The cost is controlled at the appropriate level of management from the production supervisor to upper management.
: Before you begin this assignment, review the Tying It All Together feature in the chapter. CF Industries Holdings, Inc. is one of the largest manufacturers and distributors of nitrogen fertilizer and other nitrogen products in the world. The corporation often produces and stores large amounts of inventory during periods of low demand to ensure that there is enough product to meet the demand of peak seasons. Assume that one line of fertilizer (with no beginning Finished Goods Inventory) had the following data during a time period of low demand:
Sales price $ 20.00 per case Variable manufacturing costs 4.00 per case Fixed manufacturing costs 100,000 per quarter Variable selling and administrative costs 2.00 per case Fixed selling and administrative costs 45,000 per quarter Given that the time period has low demand, assume the company produced 1,000,000 cases but only sold 250,000 cases.
1. Prepare the income statement for the quarter using variable costing.
2. Prepare the income statement for the quarter using absorption costing.
3. Why, if at all, is there a difference between operating income under the two methods?
Computing variable costing contribution margin
Refer to your answers to Short Exercise S21-6. Product X sells for $175 per unit. Assume no beginning inventories. Calculate the contribution margin using variable costing when Adamson:
S21-6 Direct materials $ 41 per unit Direct labor 57 per unit Variable manufacturing overhead 7 per unit Fixed manufacturing overhead 20,000 per year
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