Question

Summarized data for 2016 (the first year of operations) for Gorman Products, Inc., are as follows:...

Summarized data for 2016 (the first year of operations) for Gorman Products, Inc., are as follows:

Sales (75,000 units) $6,000,000
Production costs (80,000 units)
Direct material 1,760,000
Direct labor 1,440,000
Manufacturing overhead:
Variable 1,088,000
Fixed 640,000
Operating expenses:
Variable 336,000
Fixed 480,000
Depreciation on equipment 120,000
Real estate taxes 36,000
Personal property taxes (inventory & equipment) 57,600
Personnel department expenses 60,000

Assume that you must decide quickly whether to accept a special one-time order for 1,000 units for $60 per unit.

Which income statement presents the most relevant data?

Determine the apparent profit or loss on the special order based solely on these data.

Use a negative sign with your answer if the special order creates an apparent loss. Round answer to the nearest whole number.

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1
c)
Income statement based on variable costing provides a more relevant
data when one is to decide whether to accept a special order
This is because in such a decision only the incremental cost is relevant
Income statement - special order
Sales ( 1000 * 60) 60000
less
variable manufacturing cost ( 1000 * 53.60 **) 53600
variable operating expenses ( 1000 * 336000/75000) 4480
Net income 1920
**Variable Manufacturing Cost
Direct Material 1760000
Direct Lanbour 1440000
Variable Amnufacturing Overhead 1088000
Total Variable Manufacturing Cost for 80000 Unit 4288000
Variable Manufacturing Cost for 1 Unit 53.6
0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Variable and Absorption Costing Summarized data for 2016 (the first year of operations) for Gorman Products,...
Variable and Absorption Costing Summarized data for 2016 (the first year of operations) for Gorman Products, Inc., are as follows: Sales (75,000 units) $1,500,000 Production costs (80,000 units) Direct material 440,000 Direct labor 360,000 Manufacturing overhead: Variable 272,000 Fixed 160,000 Operating expenses: Variable 84,000 Fixed 120,000 Depreciation on equipment 30,000 Real estate taxes 9,000 Personal property taxes (inventory & equipment) 14,400 Personnel department expenses 15,000 a. Prepare an income statement based on full absorption costing. Only use a negative sign...
Krazy Inc manufactures industrial components. One of its products, Double Krazy, has the following production data:...
Krazy Inc manufactures industrial components. One of its products, Double Krazy, has the following production data: Per Unit Selling price $180 Direct materials $29 Direct labor $5 Variable manufacturing overhead $4 Fixed manufacturing overhead $21 Variable selling expense $2 Fixed selling and administrative expense $17 The above per unit data are based on annual production of 4,000 units of Double Krazy. 16. The company has received a special, one-time-only order for 500 units. There would be no variable selling expense...
Wyatt Corporation has just completed its first year of operations. Below are selected data: Number of...
Wyatt Corporation has just completed its first year of operations. Below are selected data: Number of units produced 50,000 units     Number of units sold   42,000 units    Selling price per unit   $ 35.00    Costs per unit:       Direct materials   $ 3.00      Direct labor    $ 5.00       Variable overhead   $ 1.00       Variable selling expenses $ 2.00    Fixed expenses:        Fixed overhead   $200,000       Fixed selling expenses    $300,000 a.) Using the variable costing approach, calculate the operating income. b.) Using the absorption costing approach, calculate the unit...
Benjamin Company had the following results of operations for the past year: Sales (16,000 units at...
Benjamin Company had the following results of operations for the past year: Sales (16,000 units at $10.45) $167,200 Direct materials and direct labor $103,200 Overhead (20% variable) 23,200 Selling and administrative expenses (all fixed) 32,900 (159,300) Operating income $7,900 A foreign company (whose sales will not affect Benjamin's market) offers to buy 4,900 units at $8.49 per unit. In addition to variable manufacturing costs, selling these units would increase fixed overhead by $690 and selling and administrative costs by $390....
ABC Inc. manufactures and sells toys. Price and cost data are as follows: Selling price per...
ABC Inc. manufactures and sells toys. Price and cost data are as follows: Selling price per unit (package of 2 CDs)...................................... $30.00 Variable costs per unit: Direct material............................................................................................................... $5.00 Direct labor...................................................................................................................... $6.00 Artist's royalties.............................................................................................................. $5.50 Manufacturing overhead.......................................................................................... $4.00 Selling expenses............................................................................................................ $2.30 Total variable costs per unit............................................................ $22.80 Annual fixed costs: Manufacturing overhead.......................................................................................... $199,000 Selling and administrative....................................................................................... $376,000 Total fixed costs................................................................................ $575,000 Forecasted annual sales volume (120,000 units)......................... $3,600,000 How many units would ABC Inc. have to sell in order to...
Special Order Total cost data follow for Greenfield Manufacturing Company, which has a normal capacity per...
Special Order Total cost data follow for Greenfield Manufacturing Company, which has a normal capacity per period of 20,000 units of product that sell for $54 each. For the foreseeable future, regular sales volume should continue to equal normal capacity. Direct material $268,800 Direct labor 202,000 Variable manufacturing overhead 154,000 Fixed manufacturing overhead (Note 1) 118,800 Selling expense (Note 2) 129,600 Administrative expense (fixed) 50,000 $923,200 Notes: 1. Beyond normal capacity, fixed overhead costs increase $4,500 for each 1,000 units...
During Heaton Company’s first two years of operations, it reported absorption costing net operating income as...
During Heaton Company’s first two years of operations, it reported absorption costing net operating income as follows: Year 1 Year 2 Sales (@ $63 per unit) $ 1,197,000 $ 1,827,000 Cost of goods sold (@ $46 per unit) 874,000 1,334,000 Gross margin 323,000 493,000 Selling and administrative expenses* 305,000 335,000 Net operating income $ \18,000\ $ 158,000 * $3 per unit variable; $248,000 fixed each year. The company’s $46 unit product cost is computed as follows: Direct materials $ 10...
​Bulldog, Inc. has budgeted sales for the first quarter of the next year to be 35,000...
​Bulldog, Inc. has budgeted sales for the first quarter of the next year to be 35,000 units. The inventory on hand at the beginning of quarter is 10,000 units. The desired ending inventory is 1,000 units. Calculate the budgeted production for the first quarter. A. 26,000 units B. 25,000 units C. 36,000 units D. 1,000 units Meridian Fashions uses standard costs for their manufacturing division. The allocation base for overhead costs is direct labor hours. From the following​ data, calculate...
During Heaton Company’s first two years of operations, it reported absorption costing net operating income as...
During Heaton Company’s first two years of operations, it reported absorption costing net operating income as follows: Year 1 Year 2 Sales (@ $62 per unit) $ 1,240,000 $ 1,860,000 Cost of goods sold (@ $34 per unit) 680,000 1,020,000 Gross margin 560,000 840,000 Selling and administrative expenses* 311,000 341,000 Net operating income $ \249,000\ $ 499,000 * $3 per unit variable; $251,000 fixed each year. The company’s $34 unit product cost is computed as follows: Direct materials $ 7...
Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company...
Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell 48,000 Rets per year. Costs associated with this level of production and sales are given below: Unit Total Direct materials $ 25 $ 1,200,000 Direct labor 10 480,000 Variable manufacturing overhead 3 144,000 Fixed manufacturing overhead 7 336,000 Variable selling expense 2 96,000 Fixed selling expense 6 288,000 Total cost $ 53 $ 2,544,000 The Rets normally sell for $58...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT