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Problem 7-12 comprehensive problem with Labor Fixed LO1 LO2 LO3 LO4 Advance Products, Inc., has just organized a new division to manufacture and sell specially designed tables using select

Problem 7-12 comprehensive
problem with Labor Fixed [LO1, LO2,LO3,LO4]

Advance Products, Inc., has
just organized a new division to manufacture and sell specially designed tables
using select hardwoods for personal computers. The division’s monthly costs are
shown in the schedules below:

Manufacturing costs:
Variable
costs per unit
Direct materials $86
Variable
manufacturing overhead $4
Fixed manufacturing overhead
costs(total) $240,000
Selling and administrative costs
Variable 15%
of sales
Fixed (Total) $160,000

Advance Products regards all
of its workers as full-time employees and the company has a longstanding
no-layoff policy. Furthermore, production is highly automated. Accordingly, the
company includes its labor costs in its fixed manufacturing overhead. The
following activity was recorded:

Units produced 4,000
Units sold 3,200

Requirement 1

(a) compute the unit product
cost under absorption costing. (Omit the “$” sign in your response.)

Unit product cost $_________________

(b) Compute the unit product cost under Variable
costing.(Omit the “$” sign in your resonse)

Unit product cost $______________

Requirement 2:
Prepare an income statement
for the month using absorption costing. (Leave no cells blank – be certain to
enter “0” whenever required. Omit “$” sign in your response.)

Absorption costing
income statement
_________________ $___________
Cost of goods sold
_________________ $_________________
_________________ __________________
___________ __________________

Requirement 3

Prepare a contribution format
income statement for the month using variable costing.(Input all amounts as
positive values. Leave no cell blank-be certain to enter “0” whenever required.
Omit the “#” sign in your response.)

Variable costing income
statement

______________ $____________
Variable expenses:
Variable cost of goods sold
__________ $____________
__________ _____________

Variable cost of goods sold _______

_____________ _________________________________
Fixed expenses _____________
____________ _________
______________ ___________________________
_______ $__________________________

Requirement 4
Assume that the company must
obtain additional financing. As a member of top management, which of the
statements that you have prepared in (2) and (3) above would you prefer to take
with you as you negotiation with the bank?

(a) Absorption costing
statement
(b) Variable costing statement

Requirement 5reconcile the
absorption costing and variable costing net operating income figures in (2) and
(3) above. (input all amounts as positive values. Omit the “$” sign in your
response.)

___________ $_______________
___________: Fixed
manufacturing overhead cost deferred ________________
___________ $_______________

Jun 26 2020 View more View Less

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