Chapter 21: Q-21-12 (page 1167)
Question:What is a business segment? Give some examples.
Answer
A business segment is a separate chain of a business.
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Preparing variable and absorption costing income statements
Claudia’s Foods produces frozen meals that it sells for \(11 each. The company computes a new monthly fixed manufacturing overhead allocation rate based on the planned number of meals to be produced that month. Assume all costs and production levels are exactly as planned. The following data are from Linda’s Foods’s first month in business:
January 2018 Units produced and sold: Sales 850 meals Production 1,050 meals Variable manufacturing cost per meal \) 5Sales commission cost per meal 1 Total fixed manufacturing overhead 315Total fixed selling and administrative costs 450 Requirements
1. Compute the product cost per meal produced under absorption costing and under variable costing.
2. Prepare income statements for January 2018 using: a. absorption costing. b. variable costing.
3. Is operating income higher under absorption costing or variable costing in January?
Comparing variable and absorption costing Refer to Exercises E21-16 and E21-17.
Requirements:
Question: Chaney Company provides lawn care services. Following are data for a recent week:
Service Revenue \(1,300
Variable Costs \)780
Contribution Margin $520 Chaney provided service to 25 customers during the week. Determine the average amount the company charged each customer, the variable cost per customer, and the contribution margin ratio.
How can variable costing be used in service companies?
Question: Computing absorption costing operating income
Refer to the information for Concord, Inc.
Requirements
Use the following information for Exercises E21-14 and E21-15.
Concord, Inc. has collected the following data for November (there are no beginning inventories):
Units produced and sold 500 units Sales price $ 450 per unit Direct materials 64 per unit Direct labor 68 per unit Variable manufacturing overhead 26 per unit Fixed manufacturing overhead 7,500 per month Variable selling and administrative costs 15 per unit Fixed selling and administrative costs 4,400 per month
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