90.2K

Verified Solution

Link Copied!

Taylor Enterprises produces lunch boxes. In 2011, it began the year with 2,000 units beginning inventory. During the year, it produced 10,000 lunch boxes and sold 12,000 for $12 per box. Variable manufacturing costs were $5 per box produced (direct material $2, direct labour $1, and variable overhead $2; variable selling and administrative expenses were $3 per unit sold; fixed manufacturing costs were $10,000 in total per year and; fixed selling and administrative costs per year were $6,000. Instructions (a) Prepare an income statement using absorption costing for year 2011. 6 Marks (b) Show a calculation that explains the difference in net income under absorption costing and variable costing. (Do not prepare a variable costing income statement) 2 Marks (c) Show a calculation that explains the difference in net income under variable costing and throughput costing. (Do not prepare a throughput costing income statement) 2 Marks (d) Suppose the accountant for Taylor Enterprises used normal costing rather than actual costing to calculate the cost of goods sold and ending inventory under absorption costing. Also assume that fixed manufacturing overhead is $10,000, based on budgeted volume of 12,500 units and the company expenses the volume variance to the cost of goods sold. (i) Prepare an income statement using absorption costing for year 2011 based on normal costing rather than actual costing. 6 Marks (ii) Reconcile the absorption normal costing net income to that calculated in part (a) 2 Marks (iii) Reconcile the absorption normal costing net income to the variable costing net income. 2

Answer & Explanation Solved by verified expert

See Answer