Answer is given below :
Explanation:
In many audit disagreements that remain unresolved at the agent level, the taxpayer should consider the appeal to the Appeals Division. Although it is part of the IRS, it has the power to resolve audit disputes. It has more settlement power than the agent. In many cases, an agreement is reached in the appeals section, which can avoid an expensive and time consuming trial.Templeton Corporation recently used $75,000 of direct materials and $9,000 of indirect materials in production activities. The journal entries reflecting these transactions would include:
Answer:
A Debit to manufacturing overhead for $9,000
Explanation:
Based on the information given in a situation where the Corporation recently used the amount of $9,000 of indirect materials during the production activities which means that The journal entries that will reflect these transactions would include a DEBIT to MANUFACTURING OVERHEAD of the amount of $9,000 which is the amount of indirect materials that was used during the production activities
A debit to manufacturing overhead for $9,000
Nation Furniture is a furniture manufacturing facility. Its workers just signed a two-year contract. The price level in the economy has increased. Answer the following set of questions based on the short run:
a. if the price level increases, input prices will: ______
1. increase.
2. remain constant.
3. decrease.
b. if the price level increases, output prices will:_________
1. decrease.
2. remain constant.
3. increase.
c. in the short run, the firm will experience a(n): _________
1. increase in economic profits.
2. decrease in economic profits.
3. increase in economic losses.
Answer: See explanation
Explanation:
a. Remain constant
From the question, we are informed that Nation Furniture workers just signed a two-year contract. This then means that even though there is an increase in price level, it doesn't affect the prices of inputs as they still remain constant.
b. Increase
We should note that when there is a rise in the price level, this will also bring about an increase in the prices of the output.
c. Increase in economic profit
The firm will have a rise in the economic profit in the short run. There'll be an increase in revenue which ultimately increase economic profit as well since input prices remain the same.
what is the cell membrane?
Answer:
a cell membrane is a double layer of lipids and proteins that surrounds a cell
Waltham Distribution Company has determined its December 31, 2020, inventory on a LIFO basis at $200,000. Information pertaining to that inventory follows.
Estimated selling price $208,000
Estimated cost of disposal 10,000
Normal profit margin 6,000
Current replacement cost 190,000
Waltham Distribution records losses that result from applying the lower-of-cost-or-market rule. At December 31, 2012, the loss that Ryan should recognize (Under US GAAP) is:_____
Answer:
$10,000
Explanation
Calculation for Waltham Distribution should records losses that result from applying the lower-of-cost-or-market rule. At December 31, 2012, the loss that Ryan should recognize (Under US GAAP) is
Using this formula
lower-of-cost-or-market rule Loss=Inventory- Current replacement cost
Let plug in the formula
lower-of-cost-or-market rule Loss= $200,000 – $190,000
lower-of-cost-or-market rule Loss= $10,000
Therefore Waltham Distribution should records losses that result from applying the lower-of-cost-or-market rule. At December 31, 2012, the loss that Ryan should recognize (Under US GAAP) is $10,000
Tanner-UNF Corporation acquired as a long-term investment $170 million of 6.0% bonds, dated July 1, on July 1, 2018. Company management has the positive intent and ability to hold the bonds until maturity. The market interest rate (yield) was 8% for bonds of similar risk and maturity. Tanner-UNF paid $140.0 million for the bonds. The company will receive interest semiannually on June 30 and December 31. As a result of changing market conditions, the fair value of the bonds at December 31, 2018, was $150.0 million.
Required:
a. How would this investment be classified on Tanner-UNF's balance sheet?
b. Prepare the journal entry to record Tanner-UNF's investment in the bonds on July 1, 2018.
Answer:
a. Investment at Amortized Cost
a. the journal entry to record Tanner-UNF's investment :
Debit : Investment in Bonds 140.0 million.
Credit : Cash 140.0 million.
Explanation:
Definition and Recognition
IAS 32 defines a Financial Asset as any asset that is cash, equity instrument of another entity, a contractual right to receive cash or another asset. The bonds acquired by Tanner-UNF Corporation presents a contractual right to receive cash therefore it is a Financial Asset.
Classification
IFRS 9 deals with the classification of Financial Assets. Financial Assets can be classified at Amortized Cost, Fair Value through other Comprehensive Income and Fair Value through Profit and loss.
If the entity`s model is to collect the contractual cash flows and if these cash flows give rise to payments of principle and interest, the Financial will be classified as Amortized Cost. Since Tanner-UNF Corporation management has the positive intent and ability to hold the bonds until maturity, they will classify the Investment at Amortized Cost.
Initial measurement
All financial investments are initially measured at Fair Value. Thus, investment in $170 million of 6.0% bonds will be measured at $140.0 million.
Journal entry :
Debit : Investment in Bonds 140.0 million.
Credit : Cash 140.0 million.
How is a provision for bad debt recognized in the income statement and balance sheet
Answer: The provision for doubtful debts is an accounts receivable contra account, so it should always have a credit balance, and is listed in the balance sheet directly below the accounts receivable line item. The two line items can be combined for reporting purposes to arrive at a net receivables figure
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If a basket selling price is $13per unit with the variable expense is $10 per unit and the company's monthly fixed expense if $7,800, what is the break even point in sales
Answer:
26,000 units
Explanation:
The break-even point is calculated by dividing fixed costs by the contribution margin per unit.
Fixed costs are $78,000
Contribution margin per unit = selling costs - variable costs
=$13-$10
Contribution margin per unit=$3
Break-even point = $7800/$3
=26,000 units
Place yourself in the position of general manager of a service department. How might formally written job requirements help you manage your employees?
Answer:
See below
Explanation:
As a manager of a service department in an organization, I am responsible for the overall results of my employees. To make work and life easier for my employees, their job requirements would be formally documented. This is to enable them know the step by step responsibilities required of each employees. This will also reduce the time taken to ask questions from the manager as all job requirements have been clearly spelt out and documented.
Again, when job responsibilities are formally written, it will enable employees ask questions where they are in doubt as it pertains to their roles. Moreover, each employees would be held accountable for his or her performance in line with the documented job requirements.
When job roles are documented, the possibility of employees hitting into production hours will be greatly reduced because each employees already know what to do .
Assume that General Electric (GE)'s current assets are $401 billion, fixed assets are $797 billion, current liabilities are $323 billion, and long-term liabilities are zero. Calculate GE's translation exposure using current/noncurrent, monetary/nonmonetary, temporal, and current rate methods.
Answer:
Answer is explained below in the explanation section.
Explanation:
Solution:
We can not solve this question as it lacks necessary data.
1. GE's Translation Exposure using current/noncurrent:
$401 billion - $401 billion = 0.
0 is the GE's translation exposure using current/noncurrent method.
2. Using Monetary/Non-monetary:
We can not calculate this requirement as we don't have the breakdown of GE's assets and liabilities under monetary/nonmonetary. So, it is not possible under the given information.
3. GE's Translation Exposure using Temporal method:
Again, we do lack necessary data to solve for this requirement. We need GE's breakdown of current assets and inventory and monetary assets to solve this question. Therefore, it is not possible to solve this question.
4. GE's Translation Exposure Using Current Rate methods:
GE's Exposure = (Current Assets + Fixed Assets) - Current Liabilities
GE's Exposure = ($401 billion + $797 billion) - $323 billion
GE's Exposure = ($1198 billion) - $323 billion
GE's Exposure = $875 billion
Why do people typically purchase insurance policies?
A. They anticipate that they will never have to pay their deductibles.
B. They believe insurance policies will increase in value over time.
C. They calculate that their insurance premiums will be greater than
their benefits.
D. They would not be able to pay for major expenses without
insurance.
Answer:
D
Explanation:
Insurance is used too help pay for major expenses, so D should be the correct answer.
People purchase insurance policies because they can't be able to reimburse for major charges without insurance.
Option D is the correct answer.
What is an insurance policy?An insurance policy is a contract between the policyholder and the insurance company to provide indemnification from the risk as specified in the policy.
After purchasing insurance policies, an individual can easily pay for huge expenses which are not in their budget. In this, the money is paid by the insurance company and the individual pays premiums for that.
Therefore, the acquisition of insurance policies by the people for making payments for huge expenses.
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Suppose that Brian, an economist from a research institute in Texas, and Crystal, an economist from a public television program, are arguing over saving incentives. The following dialogue shows an excerpt from their debate:
Crystal: I think it's safe to say that, in general, the savings rate of households in today's economy is much lower than it really needs to be to sustain the improvement of living standards.
Brian: I think a switch from the income tax to a consumption tax would bring growth in living standards.
Crystal: You really think households would change their saving behavior enough in response to this to make a difference? Because I don't.
The disagreement between these economists is most likely due to _____
Despite their differences, with which proposition are two economists chosen at random most likely to agree?
a. Immigrants receive more in government benefits than they contribute in taxes.
b. Having a single income tax rate would improve economic performance.
c. Rent ceilings reduce the quantity and quality of available housing.
Answer: c. Rent ceilings reduce the quantity and quality of available housing.
Explanation:
Economists are generally known to refuse to agree on most things due to the different schools of economic thought.
One thing they generally agree on however, is that rent ceilings reduce the quantity and quality of available housing.
The reason being that when a rent ceiling is imposed, some landlords will not see the need to improve their housing with the hope of charging higher rent rates which will lead to a reduction in housing quality.
Some landlords will not go into the rental business at all because they might doubt that the rent ceiling will provide them with enough rental income to offset the costs of constructing a building for rent.
The production possibility frontier is used to illustrate the concept of A) the laissez-faire economy. B) opportunity costs. C) equilibrium. D) aggregate demand.
Answer:
B) opportunity costs.
Explanation:
The production possibility frontier is used to illustrate the concept of opportunity costs. The production possibility frontier shows the combination of goods which can be produced by making use of all the available resources in an economy. In order to produce an extra unit of one good, some amount of other good has to be sacrificed. This is known as opportunity cost.
The production possibility frontier is applied for illustrating the concept of option b. opportunity costs.
What are opportunity costs?
The production possibility frontier represent the combination of the goods that need to be generated via using the resources that are available that time. For generating the additional unit of one good, the some value of the other goods need to be sacrificed. So for that we know as the opportunity cost.
Therefore, we can conclude that the option b is correct.
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Carlin Company, which uses net present value to analyze Investments, requires a 10% minimum rate of return. A staff assistant recently calculated a $500,000 machine's net present value to be $86,400, excluding the impact of straight-line depreciation
6.105 FV of 1 (i = 100,-5): 1.611
TV of a series of $i cash flows ( - 108, n. 5):
PV of $1 (1 - 108; n = 5) 0.621
PV of a series of $1 cash flown (1 101, n = 5) 3.791 #
If Carlin Ignores income taxes and the machine is expected to have a five-year service life, the correct net present value of the machine would be:
a) $292,700
b) $186,400
c) $86,400
Answer: c) $86,400
Explanation:
Depreciation on an asset reduces the amount of taxes that need to be paid and this is the main reason assets are depreciated.
If Carlin is going to ignore income taxes then there is no need to account for the impact of depreciation on the asset when calculating its present value.
The present value will therefore be the same as the amount calculated by the assistant at $86,400.
If a company is pursuing a low-cost strategy, it is important that employees only perform duties specified in their job description. Group of answer choices True False
Answer:
False.
Explanation:
Business strategy sets the overall direction for the business; it focuses on defining how a business would achieve its goals, objectives, and mission; as well as the funds and material resources required to implement or execute the business plan.
A low-cost strategy can be defined as a strategic pricing plan adopted by a business firm or organisation in order to make the price of their goods and services cheaper to enhance demand and increase their competitiveness i.e market share.
If a company is pursuing a low-cost strategy, it does not mean that it is important that employees only perform duties specified in their job description.
Hawaiian-born Jon P. Farmer is the founder of Kolopua Hawaii LLC, a company that markets Pure Hawaiian Air. Bottles of Pure Hawaiian Air contain air that smells like the floral bouquet that greets tourists as they get off the plane in Hawaii. Which of the following federal agencies should Farmer contact if he needs management assistance?
A. Federal Aid Program.
B. Business Welfare Administration.
C. Small Business Administration.
D. Council for Small Business.
E. Business Incubator Agency.
Answer:
C. Small Business Administration.
Explanation:
Small Business Administration (SBA) can be defined as a federal government agency that offers both managerial and financial assistance to small businesses located in the United States of America. SBA was established in 1953 as an autonomous or independent agency of the government of the United States of America. Generally, it is saddled with the responsibility of providing both managerial and financial assistance and counseling to small businesses in order to bolster the American economy.
The small business administration (SBA) serves as an intermediary between entrepreneurs and investors or creditors, in order to provide them with the necessary funds required to plan, start and grow their business.
Basically, SBA provides services such as entrepreneurial development, access to funds, advocacy and contracting to small businesses (entrepreneurs) in the United States of America.
Hence, the federal agency the Farmer should contact if he needs management assistance is Small Business Administration.
Suppose you learned that the price elasticity of demand for wheat is 0.7 between the current price for wheat and a price $2 higher per bushel. Do you think that
Answer:
Farmers will not try to reduce the supply.
Explanation:
Price elasticity of demand is the responsiveness of demand against the change in the price of the good.
As per the given data
Elasticity of demand = 0.7
Change in price = $2
It is assumed that the Price was $10
Change in price = $2 / $10 = 0.20
Use the following formula to calculate the change in quatity demand
Elasticity of demand = Change in quantity demand / Change in price
Placing values in the formula
0.7 = Change in quantity demand / 0.2
Change in quantity demand = 0.7 x 0.2 = 0.14 = 14%
As the price of the wheat increased by 20% the demand is decreased by 14%.
In this situation reducing the supply to increase the supply is not feasible because with the increase in price the demand for the wheat will fall which will conflict with their objective. It will reduce the revenue of the farmer's supply, in this case, the farmers try to reduce the supply more than will reduce their revenue more and it will make a loss for the farmers.
Leaders use different types of power to get others to follow them. Some forms of power result from a formalized position in the organization, while others derive from personal characteristics or knowledge.
a. True
b. False
Answer:
a. True
Explanation:
A leader can be defined as an individual who is saddled with the responsibility of controlling, managing and maintaining a group of people under him or her.
Some types of power expressed by leaders are referent power, Coercive,
Leaders use different types of power to get others to follow them. Some forms of power result from a formalized position in the organization, while others derive from personal characteristics or knowledge.
Select the correct answer.
This image shows a web designer's grids for different pages on a website. The uppermost box on each page is the website's identity. Which
important feature of a good website has the designer violated?
A
simplicity
B.
consistency
C.
clarity
D
harmony
Answer:
consistency
Explanation:
plato
the uppermost box is a different size and in a different place on each page, that is not consistent. consistency is one of the important features of a good website.
A company started a new product, and in the first month started 100,000100,000 units. The ending work in process inventory was 20,00020,000 units that were 1000% complete with materials and 75u% complete with conversion costs. There were 100,000100,000 units to account for, and the equivalent units for materials was $6$6 per unit while the equivalent units for conversion was $8$8 per unit. What is the value of the inventory transferred out, using the weighted-average inventory method
Answer:
$240,000
Explanation:
Calculation for What is the value of the inventory transferred out, using the weighted-average inventory method
First step is to calculate the Equivalent material cost=
Equivalent material cost= 20,000×100%×$6
Equivalent material cost= 120,000
Second step is to calculate Equivalent conversion cost
Equivalent conversion cost=20,000×75%×8
Equivalent conversion cost=120,000
Now let calculate the value of the inventory transferred out, using the weighted-average inventory method
Inventory value transferred out= 120,000+120,000
Inventory value transferred out=$240,000
Therefore the value of the inventory transferred out, using the weighted-average inventory method is $240,000
Estimated manufacturing overhead $500,000 Estimated direct labor hours 200,000 Actual manufacturing overhead $625,000 Actual direct labor hours 260,000 The company applies overhead using direct labor hours as the cost driver. Calculate the amount that overhead was overapplied or underapplied. Multiple choice question.
Answer:
$25,000
Explanation:
The computation of the overhead or underapplied amount overhead is shown below:
But before that the predetermined overhead rate is
= Estimated manufacturing overhead ÷ estimated direct labour hours
= $500,000 ÷ 200,000
= 2.5
Now the applied overhead is
= Actual direct labor hours × predetermined overhead
= 260,000 × 2.5
= $650,000
Now the overhead overapplied is
= $650,000 - $625,000
= $25,000
In the decision-making process, you must take into account several cultural variables. Describe one of the variables associated with risk tolerance and one of the variables associated with internal/external locus of control. Why are these important factors to consider?
Answer:
Answer is explained below in the explanation section.
Explanation:
There is always a need to have an important control upon the decisions that we have in the business setup. Informed decision making is very necessary for business. People use different decision setups designed to help in the manufacturing process and most often come up with very fruitful decisions.
One of the cultural factors associated with risk tolerance may be the threshold for when we can make decisions that are not detrimental to the cultural view of groups. We need to carefully consider our employees and make sure that our decisions are not too objective. Cultural-emotional bias can lead to decisions that can damage brand ownership throughout the business. This is very dangerous and detrimental for any company, so it is necessary to limit decisions and their consequences in terms of cultural sense to avoid any losses.
The internal locust of control is the kind of person who is the best fit for all the jobs. So it is obvious that this person has some control over others. But there are some do's and don'ts for such kind of person as well. Such as, he has to communicate with almost everyone in the workplace. So, he must ensure neutrality in all aspects of other people with whom he is working. Such aspects are religion, race, caste. society etc. and his humor must not harm the emotions of anyone in the workplace.
In order to run business smoothly with maximum profits and best workforce and the best workplace. Effective decision making is the key to go. Hence, these variables are very important to achieve the effective business decision making in the long term.
In January 2020, Sunland Company, a newly formed company, issued 11600 shares of its $10 par common stock for $15 per share. On July 1, 2020, Sunland Company reacquired 1160 shares of its outstanding stock for $12 per share. The acquisition of these treasury shares decreased the number of issued shares. decreased total stockholders' equity. did not change total stockholders' equity. increased total stockholders' equity.
Answer: decreased total stockholders' equity.
Explanation:
First and foremost, we have to understand that the treasury stock account is regarded as contra entity account.
Therefore, with regards to the reacquisition of these treasury shares, thus will lead to a reduction in the total stockholders' equity.
A and B started a business on 1st April 2018 the capital contribution to rupees 200000 and 150000 the partnership deed provided:
one ,interest on capital at 10%p a
2.A to get salary of ₹24000 p.a and B ₹3000per month
3. Profit are tobe sharedin the ratioof 3:2
Help me with point no.2
Answer:
DEBIT SIDE $220,700
CREDIT SIDE $220,700
Explanation:
Preparation of Profit and Loss Appropriation Account.
PROFIT AND LOSS APPROPRIATE ACCOUNT
Particular DEBIT SIDE
Interest Capital
A (10/100*200,000) 20,000
B (10/100*150,000)15,000
=35,000
Salary
A (2,000*12) 24,000
B (3,000*12) 36,000
= $60,000
Profit transferred
A Capital (125,700*3/5) 75,420
B Capital (125,700*2/5) 50,280
=125,700
TOTAL DEBIT SIDE $220,700
(35,000+60,000+125,700)
PROFIT AND LOSS APPROPRIATE ACCOUNT
Particular CREDIT SIDE
Profit and loss Account (Net profit) 216,000
Interest on drawing
A 2,200
B 2,500
TOTAL CREDIT SIDE $220,700
(216,000+2,200+2,500)
Calculation for the amount that was used to calculate the Profit transferred for both A and B
Profit = 216,000+2,200+2,500 - 35,000-60,000
Profit= 125,700
Therefore Profit and Loss Appropriation Account balance will be:
DEBIT SIDE $220,700
CREDIT SIDE $220,700
On October 1, 2020 Bonita Industries issued 5%, 10-year bonds with a face value of $8090000 at 103. Interest is paid on October 1 and April 1, with any premiums or discounts amortized on a straight-line basis. The entry to record the issuance of the bonds would include a credit of $242700 to Premium on Bonds Payable. credit of $202250 to Interest Payable. credit of $7847300 to Bonds Payable. debit of $242700 to Discount on Bonds Payable.
Answer:
a credit of $242700 to Premium on Bonds Payable
Explanation:
Based on the information given The journal entry to record the issuance of the bonds would include a credit of $242700 to Premium on Bonds Payable which is calculated as:
Premium on Bonds Payable=[($8090000*103%)-$8090000
Premium on Bonds Payable=8,332,700-$8090000
Premium on Bonds Payable=$242700
Therefore The entry to record the issuance of the bonds would include a credit of $242700 to Premium on Bonds Payable
Suppose DeGraw Corporation, a U.S. exporter, sold a solar heating station to a Japanese customer at a price of 130.5 million yen, when the exchange rate was 140.0 yen per dollar. In order to close the sale, DeGraw agreed to make the bill payable in yen, thus agreeing to take some exchange rate risk for the transaction. The terms were net 6 months. If the yen fell against the dollar such that one dollar would buy 154.4 yen when the invoice was paid, what dollar amount would DeGraw actually receive after it exchanged yen for U.S. dollars
Answer:
$845,207.3
Explanation:
Calculation for what dollar amount would DeGraw actually receive after it exchanged yen for U.S. dollars
First step is to calculate the exchange rate of 1 yen for 140.0 yen per dollar and 154.4 yen
Exchange rate of 1 Yen = $1 /140
Exchange rate of 1 Yen= $0.007142858
Exchange rate of 1 Yen = $1 / 154.4
Exchange rate of 1 Yen= $0.006476684
Now since the price for the item bought was 130,500,000 Yen which means that the exchange rate for 1 Yen will be $0.006476684
Now let calculate the dollar amount
Dollar amount=(130,500,000 *$0.006476684) / 1
Dollar amount= $845,207.3
Therefore the dollar amount that DeGraw would actually receive after it exchanged yen for U.S. dollars is $845,207.3
What is the minimum requirement to enroll in an open college?
A. 17 on the ACT
B. 1000 on the SAT
C. There is no requirement.
D. 2.0 GPA
Answer is C.
Answer:
c. there is no requirement
During the year, Juanita has the following income: Gift from her father to help with her student loans $8,500 Interest income on US Treasury Bond $400 Interest income on the municipal bond issued by the City of Chicago $250 Interest income from her savings account at BMO Bank $165 Life insurance proceeds on the death of her mother $45,000 What is Juanita's gross income for the year
Answer:
$565
Explanation:
First of all, the person that receives a gift does not pay taxes for it. Also, proceeds from a life insurance policy are not taxable either. Municipal bonds are not taxed by the federal government.
This means that Juanita's taxable income = $400 interests from Treasury bonds + $165 interests from savings account = $565.
Describe how audit procedures involving tests of controls can provide indirect evidence about whether financial statement account balances are free of material misstatement.
Answer:
Internal Controls are tested by audit team through entering dummy entries and identifying the system restrictions. Observing the management behavior towards controls and investigating any flaw in the internal control.
Explanation:
Audit is a technical process as it involves detailed analysis of the controls that are in place in the organization. The management behavior towards those controls are very important as it is the management responsibility to ensure that all employees follow the internal controls and there is no breach in the control. The financial statements should be prepared in the finance department with only the relevant staff and there should not be access given to employees of other department so that there can be less risk for material misstatement.
Review the various strategies and assemble the strategies on the continuum from left to right in the order of magnitude from least to most regarding the level of commitment, amount of risk, the amount of control, and the profit potential.
1. Contract manufacturing
2. Licensing
3. Franchising
4. Foreign Direct Investment
5. Exporting
6. Joint venture/Strategic alliance
Review each example and place it under the appropriate strategy on the continuum.
1. Foreign Customers
2. Bank of America
3. Campbell's Soup
4. KFC
5. Budweiser
6. US Cellular
A. Joint venture/Strategic alliance
B. Foreign Direct Investment
C. Licensing
D. Exporting
E. Franchising
F. Contract manufacturing
Answer:
Following are the solution to this question:
Explanation:
In part A:
The following were it's less to one of the most foreign enterprises for businesses by using danger, contribution, and command.
Licenses Exports Franchises Fabrication of contracts Joint Undertaking/Strategic Arrangement Specific Foreign ProfitsIn part B:
KFC- franchise
US Bank — Foreign Direct Investment
Soup by Campbell—Joint Venture/Strategic Alignment
Budweiser Licensing
Exportation of international clients
Cell phone US —Manufacture of contracts
The following information should be considered:
For part A:
The below were it's less to one of the most foreign enterprises for businesses via using danger, contribution, and command.
Licenses Exports Franchises Fabrication of contracts Joint Undertaking/Strategic Arrangement Specific Foreign ProfitsFor part B:
KFC- franchise
US Bank — Foreign Direct Investment
Soup by Campbell—Joint Venture/Strategic Alignment
Budweiser Licensing
Exportation of international clients
Cell phone US —Manufacture of contracts
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Aces, Inc., a manufacturer of tennis rackets, began operations this year. The company produced 6,000 rackets and sold 4, 900. At year-end, the company reported the following income statement using absorption costing.
Production costs per tennis racket total $38, which consists of $25 in variable production costs and $13 in fixed production costs (based on the 6,000 units produced). Ten percent of total selling and administrative expenses are variable. Compute net income under variable costing.
a) $165, 500
b) $233,000
c) $311,000
d) $194, 100
e) $240, 500
Answer:
a) $165, 500
Explanation:
Hi, I have attached the full question as image below
We can calculate the net income under variable costing by reconciliating the net income under absorption costing to net income under variable costing. Alternatively we can prepare a whole new variable costing income statement.
Here I will show you the by reconciliating the net income under absorption costing to net income under variable costing.
Frist, calculate the units in opening and closing stock :
units in opening inventory = 0
units in closing inventory = 6,000 - 4,900 = 1,100 rackets
Next, determine the unit fixed manufacturing cost :
unit fixed manufacturing cost = $13
Then, reconcile the incomes as shown :
Reconciliating the net income under absorption costing to net income under variable costing
net income under absorption costing $179,800
add fixed cost in opening stock $0
less fixed cost in closing stock (1,100 x $13) ($14,300)
net income under variable costing $165,500