Managerial Accounting
15th Edition
ISBN: 9781337912020
Author: Carl Warren, Ph.d. Cma William B. Tayler
Publisher: South-Western College Pub
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Textbook Question
Chapter 7, Problem 9E
The following data were adapted from a recent income statement of Caterpillar Inc. (CAT) for the year ended December 31:
Assume that $8,500 million of cost of goods sold and $4,000 million of selling, administrative, and other expenses were fixed costs. Inventories at the beginning and end of the year were as follows:
Also, assume that 30% of the beginning and ending inventories were fixed costs.
- a. Prepare an income statement according to the variable costing concept for Caterpillar Inc. Round numbers to nearest million.
- b. Explain the difference between the amount of operating income reported under the absorption costing and variable costing concepts. Round numbers to nearest million.
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Wolsey Industries Inc. expects to maintain the same inventories at the end of 20Y3 as at the beginning of the year. The total of all production costs for the year is therefore assumed to be equal to the cost of goods sold. With this in mind, the various department heads were asked to submit estimates of the costs for their departments during the year. A summary report of these estimates is as follows:
1
Estimated Fixed Cost
Estimated Variable Cost (per unit sold)
2
Production costs:
3
Direct materials
—
$66.00
4
Direct labor
—
32.00
5
Factory overhead
$190,000.00
20.00
6
Selling expenses:
7
Sales salaries and commissions
102,000.00
6.00
8
Advertising
37,000.00
—
9
Travel
10,000.00
—
10
Miscellaneous selling expense
7,800.00
1.00
11
Administrative expenses:
12
Office and officers’ salaries
138,400.00
—
13
Supplies
12,000.00
2.00
14…
Sales totaled $1,098,900 for the year, variable selling and administrative expenses total
$115,440, and fixed selling and administrative expenses totaled $176,256. There was r
beginning inventory. Assume that direct labor is a variable cost. Under variable costing,
company's net operating income for the year would be:
Wolsey Industries Inc. expects to maintain the same inventories at the end of 20Y3 as at the beginning of the year. The total of all production costs for the year is therefore assumed to be equal to the cost of goods sold. With this in mind, the various department heads were asked to submit estimates of the costs for their departments during the year. A summary report of these estimates is as follows:
1
Estimated Fixed Cost
Estimated Variable Cost (per unit sold)
2
Production costs:
3
Direct materials
—
$66.00
4
Direct labor
—
32.00
5
Factory overhead
$190,000.00
20.00
6
Selling expenses:
7
Sales salaries and commissions
102,000.00
6.00
8
Advertising
37,000.00
—
9
Travel
10,000.00
—
10
Miscellaneous selling expense
7,800.00
1.00
11
Administrative expenses:
12
Office and officers’ salaries
138,400.00
—
13
Supplies
12,000.00
2.00
14…
Chapter 7 Solutions
Managerial Accounting
Ch. 7 - What types of costs are customarily included in...Ch. 7 - Which type of manufacturing cost (direct...Ch. 7 - Which of the following costs would be included in...Ch. 7 - In the variable costing income statement, how are...Ch. 7 - Prob. 5DQCh. 7 - Prob. 6DQCh. 7 - Discuss how financial data prepared on the basis...Ch. 7 - Prob. 8DQCh. 7 - Explain why rewarding sales personnel on the basis...Ch. 7 - Explain why service companies use different...
Ch. 7 - Variable costing Marley Company has the following...Ch. 7 - Prob. 2BECh. 7 - Variable costingsales exceed production The...Ch. 7 - Prob. 4BECh. 7 - Contribution margin by segment The following...Ch. 7 - At the end of the first year of operations, 21,500...Ch. 7 - Gallatin County Motors Inc. assembles and sells...Ch. 7 - Fresno Industries Inc. manufactures and sells...Ch. 7 - On March 31, the end of the first month of...Ch. 7 - On April 30, the end of the first month of...Ch. 7 - On October 31, the end of the first month of...Ch. 7 - The following data were adapted from a recent...Ch. 7 - Estimated income statements, using absorption and...Ch. 7 - The following data were adapted from a recent...Ch. 7 - Prob. 10ECh. 7 - Explain why service companies use different...Ch. 7 - Galaxy Sports Inc. manufactures and sells two...Ch. 7 - Prob. 13ECh. 7 - Sales territory and salesperson profitability...Ch. 7 - Prob. 15ECh. 7 - Prob. 16ECh. 7 - Variable costing income statement for a service...Ch. 7 - Variable costing income statement for a service...Ch. 7 - Prob. 1PACh. 7 - The demand for solvent, one of numerous products...Ch. 7 - During the first month of operations ended May 31,...Ch. 7 - Salespersons report and analysis Walthman...Ch. 7 - Segment variable costing income statement and...Ch. 7 - Absorption and variable costing income statements...Ch. 7 - Income statements under absorption costing and...Ch. 7 - Absorption and variable costing income statements...Ch. 7 - Prob. 4PBCh. 7 - Variable costing income statement and effect on...Ch. 7 - Prob. 1MADCh. 7 - Prob. 2MADCh. 7 - Prob. 3MADCh. 7 - Segment disclosure by Apple Inc. (AAPL) provides...Ch. 7 - Prob. 1TIFCh. 7 - Inventory effects under absorption costing BendOR,...Ch. 7 - Communication Bon Jager Inc. manufactures and...Ch. 7 - Prob. 1CMACh. 7 - Chassen Company, a cracker and cookie...Ch. 7 - Prob. 3CMACh. 7 - Bethany Company has just completed the first month...
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