Chapter 8

Question 1

Outline for VC income statement

Answer 1

Sales
VC
- COGS ((DM+DL+VMOH)*units sold)
- SG&A Variable amount * Units Sold
CM
Fixed Cost
-FMOH
-FSG&A
NOI

Question 2

Outline for AC income statement

Answer 2

Sales
COGS ((DM+DL+ per unit MOH + (FMOH/units produced))
GM
Less
SG&A (V-SG&A*units sold + F-SG&A)
NOI

Question 3

Ending FG

Answer 3

Beginning FG
+ units produced
- units sold
Ending FG

Question 4

Reconcile the absorption Costung income to variable costing

Answer 4

VC Operating Income
Add: FMOH differed in ending FG inventory (units not sold * (FC/units produced) )
Less: FMOH released from beginning Inventory (units unsold from previous year * (FC from last year/ units produced last year))

Question 5

Variable Costing

Answer 5

Product Cost
- DM
- DL
- VOH
Period Cost
- FOH
- SG&A

Question 6

Why is the NOI different among methods

Answer 6

Because in variable costing, the fixed manufacturing overhead is expense in full as a period cost while in absorption costing, the fix cost is allocated on a per unit sold based which leaves some of the fixed cost to be added to the inventory account opposed to expensed on the income statement

Question 7

Reconciliation question

Answer 7

Take difference between AC and VC
and divide by fixed per unit

What’s bigger VC or AC
- VC = sold more
- AC = produced more

Sold more = Beginning inventory > ending inventory

produced more = Ending inventory > Beginning Inventory

Use:
BE
+ produced
- sold
EI

Take us nuts tgat need to be added or subtracted (

VC OI
+ FMOH differed to ending inventory
- FMOH released from beginning inventory
AC OI