Assignment Type:Group ProjectDeliverable Length:200 words; 1 Excel file with 2 worksheets
Points Possible:200Due Date:5/26/2013 11:59:59 PM CT
APA Formatted References
Due: May 12 3:00 a.m.
Individual Portion:
You are the accounting manager in a medium-sized manufacturing company. The company’s first year just ended, and the accounting department is working on closing the books. You plan to present information about unit costs and profits, to the generalmanager (GM) in two different formats. One method uses variable costing, and the other uses absorption costing. The GM will need to choose one or the other for accounting purposes. Whatever method he chooses will have to remain the method going forward as the choice of the method could impact reported profitability and therefore taxes. (The IRS frowns on firms making accounting methodology changes that impact any period’s profits.)
You explain to the GM that if you choose to use the absorptive method, it will not only impact the reported profits of the year that just ended but will have an impact on the reported profits of the upcoming year, too. He doesn’t understand what this means and asks for a more detailed explanation.
In about 200 words, explain to him:
How absorption costing differs from variable costing
How the absorptive method will not only impact the reported profits of the year that just ended but will also have an impact on the reported profits of the upcoming year
Please add your file.
Group Portion:
As the accounting manager, you and your staff need to prepare year-ending information to present to the company’s general manager.
Prepare 1 Excel file with 2 worksheets showing the following calculations.
Part A:
Part A Data
Budgeted and actual fixed costs
$1,000,000
Budgeted unit volume to be produced
10,000
Budgeted unit volume sold
10,000
Actual variable costs
$500,000
Actual unit volume sold
9,000
Beginning of year inventory
0
End of year inventory
1,000
Using the Part A data:
How many units of production were:produced?
shipped?
left in inventory?
How much of the firm’s fixed costs stayed in inventory?under variable costing?
under absorption costing?
Calculate the unit cost:using variable costing.
using absorption costing.
Based on how much of the firm’s fixed costs stayed in inventory, how much of the firm’s fixed costs ended up on the year’s COGS and income statement?under variable costing?
under absorption costing?
Under which method (variable or absorption costing), will reported profits be higher? Explain why.
Part B:
Part B Data
A firms cost structure is as follows:
Monthly fixed costs
$20,000
Variable cost/unit
$80
Selling price/unit
$100
Using the Part B data:
Calculate the firm’s break-even point in units of production.
Predict the firm’s profitability if volume is 1,200 units.
Please add your file.
The following grading guidelines will be used:
Grading Guidelines
Individual Portion (200 words)
20%
Explain how absorption costing differs from variable costing.
40%
Explain how the absorptive method will not only impact the reported profits of the year that just ended but will have an impact on the reported profits of the upcoming year, too.
Group Portion (1 Excel file with 2 worksheets)
5%
How many units of production were:produced?
shipped?
left in inventory?
5%
How much of the firm’s fixed costs stayed in inventory?under variable costing?
under absorption costing?
5%
Calculate the unit cost:using variable costing.
using absorption costing.
5%
Based on how much of the firm’s fixed costs stayed in inventory, how much of the firms fixed costs ended up on the year’s COGS and income statement?under variable costing?
under absorption costing?
5%
Under which method (variable or absorption costing), will reported profits be higher? Explain why.
5%
Calculate the firm’s break-even point in units of production.
10%
Predict the firm’s profitability if volume is 1,200 units.