[Nyobii]

#1 The following budgeted and actual data are for the operations of the All-Fixed Company.
All-fixed uses budgeted production as the denominator level and writes off any production
volume variance to cost of goods sold.

2008 2009
Sales 10,000 tons 10,000 tons
Production 20,000 tons 0 tons
Selling Price 30 per ton $30 per tons
Cost(all fixed):
Manufacturing 280,000 280,000
Operating (non-manufacturing) 40,000 40,000

1. Prepare income statement with one column for 2008, one column for 2009, and one column
for the two years together, using (a) variable costing and (b) absorption costing.

2. What is the breakeven point under(a) variable costing and (b) absorption costing?
3. What inventory costs would be carried in the balance sheet on December 31, 2008 and 2009
under each method?
4. Assume that the performance of the top manager of the company is evaluated and rewarded
largely on the basis of reported operating income. Which costiong method would athe manager prefer, why?

[Curlyben]

Seriously.
Can you at least show us where you are having problems.
We're happy to HELP but we won't do the work for you..

[Nyobii]

Seriously.
Can you at least show us where you are having problems.
We're happy to HELP but we wont do the work for you..

I have a problem with the fact that all the costs are explicitly stated to be fixed yet an income statement and breakeven level based on variable costs is needed. Ia an apportion of the costs needed? If so how can I know which amount should be fixed and which should be variable?

[paraclete]

use the high low method to separate the fixed and variable costs. If there are no variable costs then calculate the cost of sales.

In the variable cost method all fixed costs are expensed in the year they are incurred, in the absorption cost method fixed manufacturing costs are carried in inventory according to their relationship to untis produced