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The Klocka Company manufactures trendy, high-quality moderately priced watches. As Klocka's senior financial analyst, you are Requirements asked to recommend a method of inventory costing, The CFO will use your recommendation to prepare Klocka's 2017 income 1. Prepare income statements under variable and absorption costing for the year ended December 31, 2017. statement. The following data are for the year ended December 31, 2017: 2. What is Klocka's operating income as percentage of revenues under each casting method? (Click the icon to view the data.) 3. Explain the difference in operating income between the two methods. Assume standard coats per unit are the same for units in beginning inventory and units produced during the vear Also assume 4. Which costing method would you recommend to the CFO? Why? no price, spending, or efficiency variances. Any production-volume variance is written off to cost of goods sold in the month in which it occurs Requirement 1. Prepare income statements under variable and absorption costing for the year ended December 31, 2017 Begin by preparing the income statement under variable costing for the year ended December 31, 2017. Complete the top half of the income statement first, then complete the bottom portion. Variable costing 0 Data Table - X Beginning inventory, January 1, 2017 Ending inventory, December 31, 2017 2017 sales Selling price (to distributor) Variable manufacturing cost per unit, including direct materials Variable operating (marketing) cost per unit sold Fixed manufacturing costs Denominator-level machine-hours Standard production rate Fixed operating (marketing) costs 89,000 units 30,000 units 304.000 units $23.00 per unit $5.30 per unit $1.60 per unit sold 1,168,000 6,600 40 units per machine-hour $1,070,000 Print Done The Klocka Company manufactures trendy, high-quality moderately priced watches. As Klocka's senior financial analyst, you are Requirements asked to recommend a method of inventory costing, The CFO will use your recommendation to prepare Klocka's 2017 income 1. Prepare income statements under variable and absorption costing for the year ended December 31, 2017. statement. The following data are for the year ended December 31, 2017: 2. What is Klocka's operating income as percentage of revenues under each casting method? (Click the icon to view the data.) 3. Explain the difference in operating income between the two methods. Assume standard coats per unit are the same for units in beginning inventory and units produced during the vear Also assume 4. Which costing method would you recommend to the CFO? Why? no price, spending, or efficiency variances. Any production-volume variance is written off to cost of goods sold in the month in which it occurs Requirement 1. Prepare income statements under variable and absorption costing for the year ended December 31, 2017 Begin by preparing the income statement under variable costing for the year ended December 31, 2017. Complete the top half of the income statement first, then complete the bottom portion. Variable costing 0 Data Table - X Beginning inventory, January 1, 2017 Ending inventory, December 31, 2017 2017 sales Selling price (to distributor) Variable manufacturing cost per unit, including direct materials Variable operating (marketing) cost per unit sold Fixed manufacturing costs Denominator-level machine-hours Standard production rate Fixed operating (marketing) costs 89,000 units 30,000 units 304.000 units $23.00 per unit $5.30 per unit $1.60 per unit sold 1,168,000 6,600 40 units per machine-hour $1,070,000 Print Done

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