Hayden Company has 50 units in Finished Goods Inventory at the beginning of the accounting period. During the accounting period, Hayden produced 150 units and sold 200 units for $150 each. All units incurred $80 in variable manufacturing costs and $20 in fixed manufacturing costs. Hayden also incurred $7,500 in Selling and Administrative Costs, all fixed. Calculate the operating income for the year using absorption costing and variable costing.
The operating income is $2,500 under absorption costing and variable costing.
Net sales revenue ($150*200)
Less: Cost of goods sold ($100*200)
Less: Selling and administrative cost
Net sales revenue ($150*200)
Less: Variable costs ($80*200)
Less: Fixed costs
Fixed costs of goods sold($20*200)
Fixed selling and administrative cost
Computing absorption costing gross profit
Refer to your answers to Short Exercise S21-6. Product X sells for $175 per unit. Assume no beginning inventories. Calculate the gross profit using absorption 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 ye
Question: Chaney Company provides lawn care services. Following are data for a recent week:
Service Revenue $1,300
Variable Costs $780
Contribution Margin $520 Chaney provided service to 25 customers during the week. Determine the average amount the company charged each customer, the variable cost per customer, and the contribution margin ratio.
Analyzing profitability Refer to Short Exercise S21-10. Which business segment provided the greatest total contribution margin? Which
business segment had the highest contribution margin ratio?
Camden Company has divided its business into segments based on sales territories: East Coast, Midland, and West Coast. Following are financial data for 2018:
Sales price per unit
Variable cost per unit
Using variable and absorption costing, making decisions The 2018 data that follow pertain to Eli’s Electric Eyewear, a manufacturer of swimming goggles. (Eli’s Electric Eyewear had no beginning Finished Goods Inventory in January 2018.)
Number of goggles produced 245,000 Number of goggles sold 215,000 Sales price per unit $ 22Variable manufacturing cost per unit 8Sales commission cost per unit 5Fixed manufacturing overhead 1,470,000 Fixed selling and administrative costs 250,000 Requirements
1. Prepare both conventional (absorption costing) and contribution margin (variable costing) income statements for Eli’s Electric Eyewear for the year ended December 31, 2018.
2. Which statement shows the higher operating income? Why?
3. Eli’s ElectricEyewear’s marketing vice president believes a new sales promotion that costs $60,000 would increase sales to 220,000 goggles. Should the company go ahead with the promotion? Give your reasoning.
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