Exam 5: Variable Costing

Under variable costing, ending inventory reported on a company's balance sheet includes variable production costs and variable selling and administrative costs.

Brislin Gifts makes ceramic mugs and has the following amounts for 2014 (Assume the same unit costs in all years): Selling price \ 9.00 per mug Variable production cost \ 2.50 per mug Variable selling cost \ 1.10 per mug Fixed production cost \ 100,000 per month Fixed selling and administrative cost \ 60,000 per month Production and sales in units for the first three months of 2014 are as follows: Year Production Sales January 50,000 44,000 February 40,000 45,000 March 44,000 46,000 Inventory at January 1, 2014 consisted of 1,000 mugs. How much is net income for January using variable costing?

WebFlicks is an online DVD company that produces its own DVD copies of first-run movies that it sells for $8.00 each. The following information is available (Assume the same unit costs in all years): Variable costs: Product royalty fees \ 3.30 per DVD DVD production \ 1.20 per DVD Selling and admin costs \ 0.80 per DVD Fixed Costs: Production \ 128,000 per month Selling and administration \ 130,000 per month During June, 160,000 DVDs were produced and 144,000 were sold. There were 17,000 DVDs in beginning inventory. How much is inventory at the end of the month under variable costing?

Brislin Gifts makes ceramic mugs and has the following amounts during 2014 (Assume the same unit costs in all years): Selling price \ 9.00 per mug Variable production cost \ 2.50 per mug Variable selling cost \ 1.10 per mug Fixed production cost \ 100,000 per month Fixed selling and administrative cost \ 60,000 per month Production and sales in units for the first three months of 2014 are as follows: Year Production Sales January 50,000 44,000 February 40,000 45,000 March 50,000 45,000 Inventory at January 1, 2014 consisted of 1,000 mugs. How much is net income for February using full costing?

WebFlicks is an online DVD company that produces its own DVD copies of first-run movies that it sells for $8.00 each. The following information is available (Assume the same unit costs in all years): Variable costs: Product royalty fees \ 3.30 per DVD DVD production \ 1.20 per DVD Selling and admin costs \ 0.80 per DVD Fixed Costs: Production \ 128,000 per month Selling and administration \ 130,000 per month During June, 160,000 DVDs were produced and 144,000 were sold. There were 17,000 DVDs in beginning inventory. How much is inventory at the end of the month under full costing?

Boulder Blowers produces snow blowers. The selling price per snow blower is $100. Costs involved in production are: Direct material per unit \2 0 Direct labor per unit 12 Variable manufacturing overhead per unit 10 Fixed manufacturing overhead per year 148,500 In addition, the company has fixed selling and administrative costs of $150,000 per year. During the year, Boulder produces 45,000 snow blowers and sells 30,000 snow blowers. There was no beginning inventory. How much is net income using full costing?

Full costing income is a function of

If a company increases production levels without increasing its units sold, both its full costing income and cash flows will be larger than if production were at a lower level.

Meow Foods had 2,000 25-pound bags of cat food in beginning inventory. During 2014, the company manufactured 16,000 bags and sold 15,000 units. Assume the same unit costs in all years. Each bag of food is sold for $17. The company experienced the following costs: Direct materials \ 4.50 per unit Direct labor \ 2.10 per unit Variable manufacturing overhead \ 1.90 per unit Variable selling \ 1.00 per unit Fixed manufacturing overhead \ 48,000 Fixed selling \ 24,000 Fixed administrative \ 30,000 If the company uses full costing, how much will be reported as inventory on the December 31, 2014 balance sheet?