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Cost Accounting Budgeted Data

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#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?

#2. Variance anallysis, sales-mix and Sales-auantity variance

Aussie infornautic markets three different handheld Windows CE - compatible organizer.
Aussie Infonautics markets three different handheld models. PalmPro is a souped-up version for the executive on the go
Palm CE is a consumer-oriented version; and PalmKid is a stripped-down version for the young adult market.
You are Aussue Infonautics' senior vice president og marketing. The CEO has discovered that the total contribution margin
came in lower than budgeted, and it is your responsibility to explain to him why actual resultd are different
from the budget. Budgeted and actual operating data for the company's third quarter of 2010b are as follow:

Selling price Variable cost per unit Contribution Margin per unit Sales Volume in Unit
PalmPro $379 $182 $197 12,500
PalmCE 269 98 171 37,500
PalmKid 149 65 84 50,000
100,000

Actual Operating Date, Third Quarter 2010

Selling price Variable cost per unit Contribution Margin per unit Sales Volume in Unit
PalmPro $349 $178 $171 11,000
PalmCE 285 92 193 44,000
PalmKid 102 73 29 55,000
110,000
Required:
1 Compute the actual and budgeted contribution margins in dollars for each product and total for the third quarter 2010
2 Calculate the actual and budgeted sales-mix for the three products for the third quarter of 2010
3 Calculate total sales-volume, sales-mix, and sales quantity variances for the third quarter of 2010.
(Calculate all variances in terms of contribution margin).
4 Given that your CEO is known to have temper tantrums, you want to be well prepared for this meeting.
In order to be prepare, write a paragraph or two comparing actual results to budgeted amounts.

#3. Market share and market-size variances (continuationof #2)
Aussie infomautics senior vice president of marketing prepared his budget at the beginning of the third quarter
assuning a 25% market share based on total sales. The total handheld-organizer market was estimated by
Foolinstead Research to reach sales pf 400,000 units worldwide in the third quarter. However, actual sales in
the third quarter were 500,000 units.
Required:
1 Calculate the market-size variances for Ausssie Infonautics in the third quarter of 2010
(calculate all variances in terms of contribution margins).

2 Explain what happened based on the market-size variances.
3 Calculate the actual market size, in units, that would have led to no market-size variance
(again using budgeted contribution margin per unit). Use this market-size figure to calculate the actual
market share that would have led to a zero market-share variance

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#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.

All-Fixed Company
Variable Costing Income Statement
For the years ended December 31, 2008 and 2009

2008 2009 Total
Sales 300,000 300,000 600,000
Less: Variable expenses
Beginning inventory - - -
Add: Variable manufacturing costs - - -
Goods available for sale - - -
Less: Ending inventory - - -
Variable costs of goods sold - - -
Variable selling and administrative expenses - - -
Contribution margin 300,000 300,000 600,000
Less: Fixed expenses
Fixed manufacturing expenses 280,000 280,000 560,000
Fixed operating expenses 40,000 40,000 80,000
Net operating income (20,000) (20,000) (40,000)

All-Fixed Company
Absorption Costing Income Statement
For the years ended December 31, 2008 and 2009

2008 2009 Total
Sales 300,000 300,000 600,000
Less: Cost of goods sold
Beginning inventory - 140,000 -
Add: Cost of goods manufactured 280,000 280,000 ...

Solution Summary

Cost accounting budgeted data are examined.

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