Assuming that direct labor is a variable cost, the primary difference between the absorption and variable costing is that:
- variable costing treats only direct materials and direct labor as product cost while absorption costing treats direct materials, direct labor, and the variable portion of manufacturing overhead as product costs.
- variable costing treats direct materials, direct labor, the variable portion of manufacturing overhead, and an allocated portion of fixed manufacturing overhead as product costs while absorption costing treats only direct materials, direct labor, and the variable portion of manufacturing overhead as product costs.
- variable costing treats only direct materials, direct labor, the variable portion of manufacturing overhead, and the variable portion of selling and administrative expenses as product cost while absorption costing treats direct materials, direct labor, the variable portion of manufacturing overhead, and an allocated portion of fixed manufacturing overhead as product costs.
- variable costing treats only direct materials, direct labor, and the variable portion of manufacturing overhead as product costs while absorption costing treats direct materials, direct labor, the variable portion of manufacturing overhead, and an allocated portion of fixed manufacturing overhead as product costs.
Assuming that direct labor is a variable cost, the primary difference between the absorption and variable costing is that:
variable costing treats only direct materials and direct labor as product cost while absorption costing treats direct materials, direct labor, and the variable portion of manufacturing overhead as product costs.
variable costing treats direct materials, direct labor, the variable portion of manufacturing overhead,
and an allocated portion of fixed manufacturing overhead as product costs while absorption costing treats only direct materials, direct labor, and the variable portion of manufacturing overhead as product costs.
variable costing treats only direct materials, direct labor, the variable portion of manufacturing overhead, and the variable portion of selling and administrative expenses as product cost while absorption costing treats direct materials, direct labor, the variable portion of
manufacturing overhead, and an allocated portion of fixed manufacturing overhead as product costs.
variable costing treats only direct materials, direct labor, and the variable portion of manufacturing overhead as product costs while absorption costing treats direct materials, direct labor, the variable portion of manufacturing overhead, and an allocated portion of fixed manufacturing overhead as product costs.
Wyrich Corporation has two divisions: Blue Division and Gold Division. The following report is for the most recent operating period:
Total CompanyBlue Division Gold DivisionSales$522,000$391,000 $131,000 Variable expenses 160,670 89,930 70,740 Contribution margin 361,330 301,070 60,260 Traceable fixed expenses 286,000 239,000 47,000 Segment margin 75,330$62,070 $13,260 Common fixed expenses 73,080 Net operating income$2,250
The Gold Division's break-even sales is closest to:
$102,174$261,043$142,043$518,750
1. 6,000
2. income stmt
sales 191,250 var expenses var man over 103,500 var sell admin 4,500 108,000 cont margin 83,250 fixed expenses fixed man over 60,000 fixed sell admin 20,000 80,000 net op income 3,250
Fixed manufacturing overhead cost deferred in inventory = 25 units in ending inventory ×$240 per unit* =$6,000
* $60,000 ÷ 250 units = $240 per unit
2.
Variable cost of goods sold (225 units sold × $460* per unit) = $103,500
Variable
selling and administrative expenses (225 units × $20 per unit) = $4,500
*Variable cost of goods sold per unit:
Direct materials$100Direct labor 320Variable manufacturing overhead 40Variable costing unit product cost$460
var cost noi 1) 1,080,400 2) 1,032,400 3) 996,400 add/ded fix man over 1) (16,800) 2) 5,600 3) 22,400 aborp cost noi 1) 1,063,600 2) 1,038,000 3) 1,018,800
Beginning inventories 200 170 180 Ending inventories 170 180 220 Change in inventories (30) 10 40 Fixed manufacturing overhead in ending inventories (@$560 per unit)$95,200 $100,800 $123,200 Fixed manufacturing overhead in beginning inventories (@$560 per unit) 112,000 95,200 100,800 Fixed manufacturing overhead deferred in (released from) inventories (@$560 per unit)$(16,800)$5,600 $22,400 Variable costing net operating income$1,080,400 $1,032,400 $996,400 Add (deduct) fixed manufacturing overhead cost deferred in (released from) inventory under absorption costing (16,800) 5,600 22,400 Absorption costing net operating income$1,063,600 $1,038,000 $1,018,800
sales 300,000 90,000 210,000
variable exp 183,000 36,000 147,000
cont margin 117,000 54,000 63,000
trace fixed 66,000 45,000 21,000
prod line seg margin 51,000 9,000 42,000
common fixed exp 33,000
noi 18,000
Sales:
Weedban: 15,000 units × $6.00 per unit = $90,000.
Greengrow: 28,000 units × $7.50 per unit = $210,000.
Variable
expenses:
Weedban: 15,000 units × $2.40 per unit = $36,000.
Greengrow: 28,000 units × $5.25 per unit = $147,000.
Piedmont Company segments its business into two regions—North and South. The company prepared the contribution format segmented income statement as shown:
Total Company North SouthSales$600,000 $400,000 $200,000Variable expenses 360,000 280,000 80,000Contribution margin 240,000 120,000 120,000Traceable fixed expenses 120,000 60,000 60,000Segment margin 120,000 $60,000 $60,000Common fixed expenses 50,000 Net operating income$70,000
Required:
1. Compute the companywide break-even point in dollar sales.
2. Compute the break-even point in dollar sales for the North region.
3. Compute the break-even point in dollar sales for the South region.
1 425,000
2 200,000
3 100,000
The companywide break-even point is computed as follows:
Dollar sales for company to break even=Traceable fixed expenses + Common fixed expensesOverall CM ratio
=$120,000 + $50,000$240,000 ÷ $600,000
=$170,0000.40
=$425,000
2.
The break-even point for the North region is computed as follows:
Dollar sales for a segment to break even=Segment traceable fixed expensesSegment CM ratio
=$60,000$120,000 ÷ $400,000
=$60,0000.30
=$200,000
3.
The break-even point for the South region is computed as follows:
Dollar sales for a segment to break even=Segment traceable fixed expensesSegment CM ratio
=$60,000$120,000 ÷ $200,000
=$60,0000.60
=$100,000