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Acme Novelty Company produces coin purses and key chains Selected data for the past year are as follows

Acme Novelty Company produces coin purses and key chains. Selected data for the past year are as follows:

 

Coin Purse

Key Chain

Production (units)

100,000

200,000

Sales (units)

90,000

210,000

Selling price

$5.50

$4.50

Direct labor hours

50,000

80,000

Manufacturing costs:

 

 

Direct materials

$ 75,000

$100,000

Direct labor

250,000

400,000

Variable overhead

20,000

24,000

Fixed overhead

50,000

80,000

Nonmanufacturing costs:

 

 

Variable selling

30,000

60,000

Direct fixed selling

35,000

40,000

Common fixed selling

25,000

25,000

Budgeted fixed overhead for the year, $130,000, equaled the actual fixed overhead. Fixed overhead is assigned to products using a plant wide rate based on expected direct labor hours, which were 130,000. The company had 10,000 key chains in inventory at the beginning of the year. These key chains had the same unit cost as the key chains produced during the year.

Required:

1. Compute the unit cost for the coin purses and key chains using the variable costing method. Compute the unit cost using absorption costing.

2. Prepare an income statement using absorption costing.

3. Prepare an income statement using variable costing.

4. Explain the reason for any difference between absorption- and variable-costing operating incomes.

5. Prepare a segmented income statement using products as segments.

Jun 24 2020 View more View Less

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