Posted: April 30th, 2016
Using the Part A data:
Under which method (variable or absorption costing), will reported profits be higher? Explain why.
Part A Data
Budgeted and actual fixed costs actual fixed costs $1,000,000
Budgeted unit volume to be produced 10,000
Budgeted unit volume sold 10,000
Actual variable costs $500,000
Actual unit volume sold 9,000
Beginning of year inventory 0
End of year inventory 1,000
Part B Data
A firms cost structure is as follows:
Monthly fixed costs ,000
Variable cost/unit $80
Selling price/unit $100
Using the Part B data:
Calculate the firm’s break-even point in units of production.
Predict the firm’s profitability if volume is 1,200 units.You are the accounting manager in a medium-sized manufacturing company. The company’s first year just ended, and the accounting department is working on closing the books.
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