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## Accounting

 Accounting Basics Cost Accounting Financial Accounting Managerial Accounting Auditing Taxation

problem: James Tyler started a small manufacturing firm, JT Enterprises, at the starting of 2005. James has prepared following income statement for the first quarter of operations.

 JT Enterprises Income Statement For the Quarter Ended March 31, 2005 Sales revenue (25,000 units) \$1,200,000 Less variable costs: Variable cost of goods sold \$540,000 Variable selling and administrative expenses 260,000 800,000 Contribution margin _____________ _____________ Less fixed costs: \$400,000 Fixed manufacturing overhead \$300,000 Fixed selling and administrative expenses 150,000 450,000 _____________ _____________ Net loss (\$50,000) ___________ ___________

Variable cost of goods sold includes direct materials, direct labor, & variable manufacturing overhead. The firm starts the quarter with no inventory; it manufactured 30,000 units over the period. Variable selling & administrative expenses are based on units sold.

Required

[A] Compute unit product cost using absorption costing.

[B] Use absorption costing to rework the income statement.

[C] Does the loss figure change using absorption costing?  If yes, describe your reasoning.

[D] During the 2nd quarter of operations, JT again manufactured 30,000 units but sold 35,000 units. Make income statements for the second quarter using both the variable-and absorption-costing methods.

[E] Describe the difference in net income (or loss) in the 2nd quarter between the two statements prepared in requirement (D).

Cost Accounting, Accounting

• Category:- Cost Accounting
• Reference No.:- M922444

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