Convert the divisional absorption income statement

Assignment Help Financial Accounting
Reference no: EM13510194

Mr. Rosen is the manager of a division of Jokkmok Industries. He is one of several managers being considered for the position of CEO, as the current CEO is retiring in a year.

All divisions use standard absorption costing. The division has the capacity to produce 50,000 units a quarter and quarterly fixed overhead amounts to $600,000. Mr. Rosen has been looking at the report for the first three months of the year and is not happy with the results.

Division Income Statement 

For the Quarter Ending March 31, 2013

Production: 25,000 units

 

 

Sales (25,000 units)

 

$2,500,000

Cost of goods sold

 

1,800,000

Gross profit

 

$700,000

Selling & general expenses

 

350,000

Net income

 

$350,000

The sales forecast for the second quarter is 25,000 units. Mr. Rosen had budgeted second quarter production at 25,000 units but changes it to 50,000 units, which is total capacity for a quarter. The sales forecasts for each of the last two quarters of the year remain at 25,000 units. Actual fixed costs incurred remain constant in total and variable costs remain constant on per unit basis.

Computations:

  • Convert the divisional absorption income statement to a contribution margin income statement for the quarter.
  • Prepare absorption and contribution margin income statements for the succeeding quarter for the division.
  • Compute production costs per unit for both approaches and for both quarters.

Discussion:

  • Did Mr. Rosen improve his performance for the second quarter? Indicate the information you used for your assessment.
  • Can you make any suggestions for reporting in the future?
  • Do you think Mr. Rosen should be seriously considered for the CEO position? Why or why not?
  • Discuss three shortcomings of the absorption approach for internal decision-making.

Reference no: EM13510194

Questions Cloud

Tata motors currently adopts a cost-leadership strategy : Tata Motors currently adopts a cost-leadership strategy in the Indian automobile industry
Find the net upward force on an airplane wing : What is the net upward force on an airplane wing of area 26.0 m2 if the speed of air flow is 246 m/s across the top of the wing and 222 m/s across the bottom
Egalitarian values conflict with negative attitudes : This occurs when people’s reported egalitarian values conflict with negative attitudes toward women: Those whose nondominant group membership goes unnoticed and undisclosed are ________.
Obtain the work done by the air : Air that initially occupies 0.80 m3 at a gauge pressure of 140 kPa is expanded isothermally to a pressure of 101.3 kPa, Compute the work done by the air
Convert the divisional absorption income statement : Convert the divisional absorption income statement to a contribution margin income statement for the quarter and prepare absorption and contribution margin income statements for the succeeding quarter for the division.
The international system to achieve peace : What role should the United States play in the international system to achieve peace?
Relationship between dominant and minority group : Explain why status as a "minority group" is not necessarily related to numerical representation in society. Please analyze the relationship between dominant and minority group relationships.
What was lewisburn operating income : Rodney Worsham is paid $10 an hour for straight-time and $15 an hour for overtime. One week he worked 45 hours, which included 5 hours of overtime, and 3 hours of idle time caused by material shortages.
Calculate the frequency of the fundamental oscillation : A cord of length 1.5 m is fixed at both ends. Its mass per unit length is 1.2 g/m and the tension is 12 N. Calculate the frequency of the fundamental oscillation

Reviews

Write a Review

Financial Accounting Questions & Answers

  Illustrate what is the total expected cost

Assuming that this activity is within the relevant range, illustrate what is the total expected cost if the activity level is 17,300 machine hours?

  Question on 1st january 2013 the balance in kubera cos

question on 1st january 2013 the balance in kubera cos allowance for bad debts account was 1300. through the year a

  How to establish a new accounting system

Calculate the profit for the previous period and then calculate the Capital figure as at 1 July (ready for the start of the next year).

  How much would its accounts receivable decline

How much would its accounts receivable decline and what cash flow from sales is expected in March

  What is credit balance in the allowance account

the allowance for doubtful accounts was a debit of $100,000. If 2% of the accounts receivable are expected to be uncollectible, what is credit balance in the allowance account after the year-end adjustment

  What is the current ratio after the declaration

A company has current assets of $607,500 and current liabilities of $262,700. The board of directors declares a cash dividend of $167,000. What is the current ratio after the declaration but before payment?

  Manufacturing statement for the year ended

Complete the schedule on the answer sheet by entering EACH COST in the amount for the production of 50,000 units as (a) either a product cost and compute totals for each column. In other words, you should have a total for direct materials, direct ..

  Determine present value of each plan

Determine the present value of each plan. (Round present value factor calculations to 4 decimal places, e.g. 0.2525. Round all other calculations and final answer to 0 decimal places, e.g. 5,250.)

  What is the minimum monthly income needed to purchase

what is the minimum monthly income needed to purchase a $300,000 house when the interest rate 6% compounded monthly?

  Accumulated depreciation against the gross carrying amount

Assume Candy Company accounts for accumulated depreciation by eliminating the accumulated depreciation against the gross carrying amount of the asset and restating the net amount to the revalued amount of the asset.

  Question evaluate product cost and purpose an income

question evaluate product cost and purpose an income statement under absorption and variable costing.polk company

  Explain statement of retained earnings

Using the following Adjusted Trial Balance, (1) prepare an Income Statement, (2) Statement of Retained Earnings (note that Retained Earnings has a beginning balance of $78,600 as shown in the unadjusted Trial Balance), and (3) Balance Sheet.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd