Oates Company, which has only one product, has provided the following data concerning its most recent month of operations:

156. Oates Company, which has only one product, has provided the following data concerning its most recent month of operations:

           

	Selling price..............................................	$120
	Units in beginning inventory.....................	0
	Units produced..........................................	7,600
	Units sold..................................................	7,400
	Units in ending inventory..........................	200
	Variable costs per unit:
	Direct materials......................................	$15
	Direct labor............................................	$48
	Variable manufacturing overhead..........	$7
	Variable selling and administrative.......	$10
	Fixed costs:
	Fixed manufacturing overhead..............	$228,000
	Fixed selling and administrative............	$66,600

            Required:

           

a.      Prepare an income statement for the month using the contribution format and the variable costing method.

b.     Prepare an income statement for the month using the absorption costing method.

            Ans: 

            a. Variable costing income statement

	Sales..........................................................		$888,000
	Less variable expenses:
	Variable cost of goods sold:
	Beginning inventory............................	$          0
	Add variable manufacturing costs......	532,000
	Goods available for sale......................	532,000
	Less ending inventory.........................	14,000
	Variable cost of goods sold....................	518,000
	Variable selling and administrative.......	74,000	592,000
	Contribution margin..................................		296,000
	Less fixed expenses:
	Fixed manufacturing overhead..............	228,000
	Fixed selling and administrative............	66,600	294,600
	Net operating income................................		$   1,400

b. Absorption costing income statement

	Sales...................................................................		$888,000
	Cost of goods sold:
	Beginning inventory.......................................	$          0
	Add cost of goods manufactured....................	760,000
	Goods available for sale.................................	760,000
	Less ending inventory....................................	20,000	740,000
	Gross margin......................................................		148,000
	Selling and administrative expenses expenses:
	Variable selling and administrative................	74,000
	Fixed selling and administrative....................	66,600	140,600
	Net operating income........................................		$   7,400

            LO:  2    

    157. Succulent Juice Company manufactures and sells premium tomato juice by the gallon. Succulent just finished its first year of operations. The following data relates to this first year:

           

	Number of gallons produced..........................................	75,000
	Number of gallons sold..................................................	70,000
	Sales price......................................................................	$3.00 per gallon
	Unit product cost under variable costing.......................	$1.45 per gallon
	Total contribution margin..............................................	$84,000
	Total fixed manufacturing overhead cost......................	$63,000
	Total fixed selling and administrative expense..............	$10,500

            Required:

           

            Using the absorption costing method, prepare Succulent Juice Company's income statement for the year.

            Ans: 

	Sales (70,000 × $3.00)...........................................		$210,000
	Cost of goods sold:
	Beginning inventory............................................	$          0
	Add cost of goods manufactured (75,000 × $2.29*).............................................................	171,750
	Goods available for sale......................................	171,750
	Less ending inventory (5,000 × $2.29)...............	11,450	160,300
	Gross margin..........................................................		49,700
	Selling and administrative expenses**..................		35,000
	Net operating income.............................................		$ 14,700

* $1.45 + ($63,000/75,000)

** Total variable cost = $210,000 - $84,000 = $126,000;

Variable selling and administrative = $126,000 - ($1.45 × 70,000) = $24,500

Total selling and administrative = $24,500 + $10,500

            LO:  2     Level:  Hard

    158. Worrel Corporation manufactures a variety of products. The following data pertain to the company's operations over the last two years:

           

	Variable costing net operating income, last year............	$71,000
	Variable costing net operating income, this year............	$92,000
	Fixed manufacturing overhead costs deferred in inventory under absorption costing, last year..............	$2,000
	Fixed manufacturing overhead costs released from inventory under absorption costing, this year..............	$11,000

            Required:

           

a.      Determine the absorption costing net operating income last year. Show your work!

b.     Determine the absorption costing net operating income this year. Show your work!

            Ans: 

            a. and b.

		Last Year	This Year
	Variable costing net operating income.....................	$71,000	$92,000
	Add fixed manufacturing overhead costs deferred in inventory under absorption costing..................	2,000	0
	Deduct fixed manufacturing overhead costs released from inventory under absorption costing	0	(11,000)
	Absorption costing net operating income................	$73,000	$81,000

          

    159. Corbett Corporation manufactures a variety of products. Last year, variable costing net operating income was $72,000. The fixed manufacturing overhead costs deferred in inventory under absorption costing amounted to $29,000.

            Required:

           

            Determine the absorption costing net operating income last year. Show your work!

            Ans: 

	Variable costing net operating income............................	$72,000
	Add fixed manufacturing overhead costs deferred in inventory under absorption costing.............................	29,000
	Deduct fixed manufacturing overhead costs released from inventory under absorption costing....................	0
	Absorption costing net operating income.......................	$101,000

          

    160. Last year, Rasband Corporation's variable costing net operating income was $57,000. The fixed manufacturing overhead costs deferred in inventory under absorption costing amounted to $30,000.

           

            Required:

           

            Determine the absorption costing net operating income last year. Show your work!

            Ans: 

	Variable costing net operating income............................	$57,000
	Add fixed manufacturing overhead costs deferred in inventory under absorption costing.............................	30,000
	Deduct fixed manufacturing overhead costs released from inventory under absorption costing....................	0
	Absorption costing net operating income.......................	$87,000

          

    161. Phinisee Corporation manufactures a variety of products. The following data pertain to the company's operations over the last two years:

           

	Variable costing net operating income, last year............	$82,700
	Variable costing net operating income, this year............	$87,800
	Increase in ending inventory, last year............................	900
	Decrease in ending inventory, this year..........................	3,100
	Fixed manufacturing overhead cost per unit...................	$2

            Required:

           

a.      Determine the absorption costing net operating income for last year. Show your work!

b.     Determine the absorption costing net operating income for this year. Show your work!

            Ans: 

            a. and b.

		Last Year	This Year
	Change in units in ending inventory..................	$900	($3,100)
	Fixed manufacturing overhead cost per unit.....	$2	$2
	Change in fixed manufacturing overhead in ending inventory............................................	$1,800	($6,200)
	Variable costing net operating income..............	$82,700	$87,800
	Add fixed manufacturing overhead costs deferred in inventory under absorption costing............................................................	1,800	0
	Deduct fixed manufacturing overhead costs released from inventory under absorption costing............................................................	0	(6,200)
	Absorption costing net operating income..........	$84,500	$81,600

          

    162. Last year, Denogean Corporation's variable costing net operating income was $64,200 and ending inventory increased by 1,900 units. Fixed manufacturing overhead cost per unit was $4.

           

           Required:

           

            Determine the absorption costing net operating income for last year. Show your work!

            Ans: 

	Change in units in ending inventory....................................	$1,900
	Fixed manufacturing overhead cost per unit........................	$4
	Change in fixed manufacturing overhead in ending inventory...........................................................................	$7,600
	Variable costing net operating income.................................	$64,200
	Add fixed manufacturing overhead costs deferred in inventory under absorption costing..................................	7,600
	Deduct fixed manufacturing overhead costs released from inventory under absorption costing..................................	0
	Absorption costing net operating income............................	$71,800