Accounting Information Sys 3

Auditing 3

Cost Accounting 3

Intermediate Accounting 3

ABC Corp. Balance Sheet As of December 31, 2006 Assets Liability Cash $6,000 Accounts Payable $3,000 Accounts Receivable $4,000 Stockholders' Equity Common Stock $3,000 Additional Paid-in Capital $2,000 Retained Earnings $2,000 Total Liability and Stockholders' Equity Total Assets $10,000 $10,000 Below is a summary of events experienced by ABC Cor

ACCT | 301A | Intermediate Accounting 3 | question bank | ABC Corp. Balance Sheet As of 

9-17 (20 min.) Throughput costing (continuation of Exercise 9-16). The variable manufacturing costs per unit of Nascar Motors are as follows: Required: 1. Prepare income statements for Nascar Motors in April and May 2014 under throughput costing. 2. Contrast the results in requirement 1 with those in requirement 1 of Exercise 9-16. 3. Give one motivation for Nascar Motors to adopt throughput costing. SOLUTION 1. April 2014 May 2014 Revenues a $8,400,000 $12,480,000 Direct material cost of goods sold Beginning inventory Direct materials in goods manufactured b $ 0 3 ,350,000 $1,005,000 2 ,680,000 Cost of goods available for sale Deduct ending inventory c 3,350,000 (1 ,005,000) 3,685,000 (201 ,000) Total direct material cost of goods sold Throughput margin Other costs 2 ,345,000 6,055,000 3 ,484,000 8,996,000 Manufacturing costs 3,650,000 3,320,000 Other operating costs 1 ,650,000 2 ,160,000 Total other costs Operating income 5 ,300,000 $ 755 ,000 5 ,480,000 $ 3 ,516,000 a $24,000 × 350; $24,000 × 520 e ($3,300 × 400) + $2,000,000 b $6,700 × 500; $6,700 × 400 f ($3,000 × 350) + $600,000 c $6,700 × 150; $6,700 × 30 g ($3,000 × 520) + $600,000 d ($3,300 × 500) + $2,000,000 2. Operating income under: April May Variable costing Absorption costing Throughput costing $1,250,000 1,850,000 755,000 $3,120,000 2,640,000 3,516,000 In April, throughput costing has the lowest operating income, whereas in May throughput costing has the highest operating income. Throughput costing puts greater emphasis on sales as the source of operating income than does either absorption or variable costing. 3. Throughput costing puts a penalty on production without a corresponding sale in the same period. Costs other than direct materials that are variable with respect to production are expensed in the period of incurrence, whereas under variable costing they would be capitalized. As a result, throughput costing provides less incentive to produce for inventory than either variable costing or absorption costing.

ACCT | 302 | Cost Accounting 3 | lecture notes | 9-17 (20 min.) Throughput cost

 The breakeven point formula can be modiﬁed to become a proﬁt planning tool by adding Target Operating Income to ﬁxed costs in the numerator. Quantity of Units = (Fixed Costs+Target Operating Income) Required to Be Sold Contribution Margin per Unit 3-18 Copyright © 2015 Pearson Education, Inc. All Rights Reserved Emma has ﬁxed costs of $2,000 and a contribution margin percentage of 40%. If Emma wants to make a proﬁt of $2,000, what must revenue equal? What if Emma wants to make a proﬁt of $3,000, what must revenue equal? Remember the formula: (Fixed Cost+ Target Operating Income) / Contribution Margin % Let’s look at the details: 3-19 Copyright © 2015 Pearson Education, Inc. All Rights Reserved Revenue = $10,000 Revenue = $12,500 For OPERATING INCOME of $2,000 Revenue=(FC+TOI)/CM % Revenue = (2,000+2,000)/.40 = For OPERATING INCOME of $3,000 Revenue=(FC+TOI)/ CM% Revenue = (2,000+3,000)/.40 = 3-20 3-21 Copyright © 2015 Pearson Education, Inc. All Rights Reserved 3-22  3-19  3-20 3-23  2. Which of the following is not an assumption of cost-volume-proﬁt analysis?  a. The time value of money is incorporated in the analysis.  b. Costs can be classiﬁed into variable and ﬁxed components.  c. The behavior of revenues and expenses is accurately portrayed as linear over the relevant range.  d. The number of output units is the only driver. 3-24  After-tax proﬁt (Net Income) can be calculated by:  Net Income = Operating Income * (1-Tax Rate)  Net income can be converted to operating income for use in CVP equation  Operating Income = I I Net Income I (1-Tax Rate) Note: The CVP equation will continue to use operating income. We’ll use this conversion formula to obtain the operating income value when provided with Net Income. 3-25 Copyright © 2015 Pearson Education, Inc. All Rights Reserved  Tee Times, Inc. produces and sells the ﬁnest quality golf clubs in all of Clay County. The company expects the following revenues and costs in 2004 for its Elite Quality golf club sets:  Revenues (400 sets sold @ $600 per set) $240,000  Variable costs 160,000  Fixed costs50,000 3-26 4. How many sets of clubs must be sold for Tee Times, Inc. to reach their breakeven point? a. 400 b. 250 c. 200 d. 150 3-27 5. How many sets of clubs must be sold to earn a target operating income of $90,000? a. 700 b. 500 c. 400 d. 300 3-28 6. What amount of sales must Tee Times, Inc. have to earn a target net income of $63,000 if they have a tax rate of 30 percent? a. $489,000 b. $429,000 c. $420,000 d. $300,000 3-29

ACCT | 302 | Cost Accounting 3 | lecture notes |  The breakeven point formula 

Chapter_11.docx-Cost Accounng

9-1 Chapter 09 Appendix 9A Monetary unit sampling ©McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted without the prior written consent of McGraw-Hill Education. 9-2 Monetary Unit Sampling (MUS) Overview  A diﬀerent approach, generally applied to vari

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