Question

2. Babe, Inc., began business at the start of the current year and maintains its accounting records on an absorption-cost basis. The following selected information appeared on the company's income statement and end-of-year balance sheet: Income-statement data: Sales revenues (35,000 units x $22) $770,000 Gross margin 30% of sales Contribution margin 40% of sales Total sales and administrative expenses 160,000 Balance-sheet data: Ending finished-goods inventory (12,000 units) 192,000 The gross margin indicated above is before adjusting for fixed overhead volume variance. Planned production for the year Is 50,000. The firm paid a 5% commission based on gross sales dollars to its sales force. Required: A) How much of the fixed manufacturing overhead will be expensed under absorption costing and under variable costing? B) How much is the cost of goods sold (actual) under absorption costing? Under variable costing? C) How much fixed manufacturing overhead did the company apply to each unit produced under absorption costing? Under variable costing? D) How much should be the finished goods ending inventory under variable costing? E) What is the company's net income under variable costing? Under absorption costing?

          2. Babe, Inc., began business at the start of the current year and maintains its accounting records on an
absorption-cost basis. The following selected information appeared on the company's income statement and
end-of-year balance sheet:

Income-statement data:
Sales revenues (35,000 units x $22) $770,000
Gross margin 30% of sales
Contribution margin 40% of sales
Total sales and administrative expenses 160,000
Balance-sheet data:
Ending finished-goods inventory (12,000 units) 192,000

The gross margin indicated above is before adjusting for fixed overhead volume variance. Planned production
for the year Is 50,000. The firm paid a 5% commission based on gross sales dollars to its sales force.

Required:
A) How much of the fixed manufacturing overhead will be expensed under absorption costing and under
variable costing?
B) How much is the cost of goods sold (actual) under absorption costing? Under variable costing?
C) How much fixed manufacturing overhead did the company apply to each unit produced under
absorption costing? Under variable costing?
D) How much should be the finished goods ending inventory under variable costing?
E) What is the company's net income under variable costing? Under absorption costing?

2. Babe, Inc., began business at the start of the current year and maintains its accounting records on an
absorption-cost basis. The following selected information appeared on the company's income statement and
end-of-year balance sheet:

Income-statement data:
Sales revenues (35,000 units x 22)770,000
Gross margin 30% of sales
Contribution margin 40% of sales
Total sales and administrative expenses 160,000
Balance-sheet data:
Ending finished-goods inventory (12,000 units) 192,000

The gross margin indicated above is before adjusting for fixed overhead volume variance. Planned production
for the year Is 50,000. The firm paid a 5% commission based on gross sales dollars to its sales force.

Required:
A) How much of the fixed manufacturing overhead will be expensed under absorption costing and under
variable costing?
B) How much is the cost of goods sold (actual) under absorption costing? Under variable costing?
C) How much fixed manufacturing overhead did the company apply to each unit produced under
absorption costing? Under variable costing?
D) How much should be the finished goods ending inventory under variable costing?
E) What is the company's net income under variable costing? Under absorption costing?

Added by Lowi S.

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