Variable and Absorption Costing Summarized data for 2019 (the first year of operations) for Gor- man Products, Inc., are as follows: Sales (70,000 units)..... Production costs (80,000 units): Direct materials.. Direct labor... Manufacturing overhead: Variable... Fixed.. Operating expenses: Variable... Fixed.. Depreciation on equipment.. Real estate taxes.. Personal property taxes (on inventory and equipment) Personnel department expenses... ****** $2,800,000 880,000 720,000 544,000 320,000 175,000 240,000 60,000 18,000 28,800 30,000 Required b. a. Prepare an income statement based on full absorption costing. Prepare an income statement based on variable costing. Assume that you must decide quickly whether to accept a special one-time order for 1,000 units for $25 per unit. Which income statement presents the most relevant data? Determine the appar- ent profit or loss on the special order based solely on these data. d. If the ending inventory is destroyed by fire, which costing approach would you use as a basis for filing an insurance claim for the fire loss? Why?

Variable and Absorption Costing Summarized data for 2019 (the first year of operations) for Gor- man Products, Inc., are as follows: Sales (70,000 units)..... Production costs (80,000 units): Direct materials.. Direct labor... Manufacturing overhead: Variable... Fixed.. Operating expenses: Variable... Fixed.. Depreciation on equipment.. Real estate taxes.. Personal property taxes (on inventory and equipment) Personnel department expenses... ****** $2,800,000 880,000 720,000 544,000 320,000 175,000 240,000 60,000 18,000 28,800 30,000 Required b. a. Prepare an income statement based on full absorption costing. Prepare an income statement based on variable costing. Assume that you must decide quickly whether to accept a special one-time order for 1,000 units for $25 per unit. Which income statement presents the most relevant data? Determine the appar- ent profit or loss on the special order based solely on these data. d. If the ending inventory is destroyed by fire, which costing approach would you use as a basis for filing an insurance claim for the fire loss? Why?

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter3: Cost Behavior And Cost Forecasting

Section: Chapter Questions

Problem 54E: Income Statements under Absorption and Variable Costing In the coming year, Kalling Company expects...

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