Create an absorption costing income statement

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Reference no: EM131820280

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Question 1

Roller Paint Co. reported the following data for the month of September. There were no beginning inventories and all units were completed (no work in process).

 

?Total Cost

Number of Units

?Unit Cost

Manufacturing costs:

 

 

 

  Variable

$465,000

30,000

$15.50

  Fixed

210,000

30,000

7.00

    Total

$675,000

 

$22.50

Selling and administrative expenses:
Variable          $2 per unit sold
Fixed             $39,000

In the month of September, 28,000 of the 30,000 units manufactured were sold at a price of $80 per unit.

(a) Prepare a variable costing income statement.
(b) Prepare an absorption costing income statement.
(c) Briefly explain why there is a difference in income from operations between the two methods.

Question 2

On August 1, Jones Corporation's Packaging Department had work in process inventory of 8,000 units that were75% complete with respect to materials and 30% complete with respect to conversion costs. The cost of theseunits was $99,525 ($62,000 transferred-in from previous departments, $28,775 in materials, and $8,750 in labor andoverhead). During August, 125,000 units were transferred into the department. These units had accumulated costsin previous departments of $1,418,560. The packaging department incurred costs of $799,225 for materials and$498,010 for conversion costs in August and transferred 131,000 units out of the department. The 2,000 unitsremaining in ending inventory are 50% complete with respect to materials and 20% complete with respect toconversion costs. Jones uses the average cost method to cost its inventories.

(a) Calculate the cost per equivalent unit for transferred-in costs, materials, and conversion costs.
(b) Calculate the cost of the units transferred out of the department.
(c) Calculate the cost of the ending inventory.

Question 3

Discuss how job order cost information is used in decision making. What are some possible reasons that actualcost of materials would exceed expected costs for a job?

Question 4

Discuss the use of job order costing for professional services businesses. What are the similarities and differencesbetween service and manufacturing business job order costing?

Reference no: EM131820280

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