apa style

 

Briefly answer the attached (less than a page)

The Heart Company keeps no Work in Process Inventories.

At the beginning of 2014, the company had no beginning Finished Goods inventory. For 2014, the company had budgeted production and sales of 40,000 units. This figure is also the denominator level for 2014. Actual production for 2014 is 42,000 units, and actual sales for 2014 were 41,000 units. The company purchased and used the same amount of direct materials during 2014. The actual selling price for 2014 was $45 per unit. At the end of 2014, any adjustments are closed totally to Cost of Goods Sold. Unit production costs for 2014 are as follows:

Standard Cost Per Unit Actual Cost Per Unit

Direct Materials $ 5.40 $ 5.60

Direct Labor $12.00 $11.90

Variable Overhead $ 4.50 $ 3.85

Fixed Overhead $11.25 $10.75

When using standard absorption costing, the company has the following variances in 2014:

Materials Price Variance $16,800 Fav. Variable OH Spending Variance $14,700 Fav.

Materials Quantity Variance $25,200 Unf. Variable OH Efficiency Variance $12,600 Fav.

Labor Rate Variance $29,400 Unf. Fixed OH Budget Variance $ 1,500 Unf.

Labor Efficiency Variance $33,600 Fav. Fixed OH Production Volume Var. $22,500 Fav.

For both normal and standard costing, overhead is charged to units on the basis of direct labor hours. The standard is .75 hour per unit, but the actual labor usage was .7 hour per unit. For both fixed and variable overhead, you may assume that the predetermined overhead rates PER HOUR are the same for both normal costing and standard costing. This does NOT mean that these rates are the same PER UNIT. Actual period expenses are $190,000 fixed plus $4 per unit sold variable.

REQUIRED: You are to prepare, in good form, 6 income statements. The only heading that

you need on each statement is to designate which costing method is used. The

costing methods are:

1. Actual absorption costing

2. Actual variable costing

3. Normal absorption costing

4. Normal variable costing

5. Standard absorption costing

6. Standard variable costing

On each income statement, I want to see a full Cost of Goods Sold section, from Beginning Finished Goods down through Unadjusted Cost of Goods Sold, and then show the adjustment that is needed, if any, to get Adjusted Cost of Goods Sold. Please use the same format that I used for the class example for Chapter 9. On each absorption costing income statement, I want to see Gross Profit clearly labeled, as well as net operating income. On each variable costing income statement, I want to see Contribution Margin clearly labeled, as well as net operating income. Any adjustment to Cost of Goods Sold can be shown as only one number. For example, when using standard costing, you don’t have to list all of the variances that are being used to compute the adjustment to Cost of Goods Sold. Just show the one net total number that is relevant.

Notice that you are charging overhead to production based on labor hours, not units. So, using normal costing you are going to have to compute the underallocated or overallocated overhead based on actual hours used to produce actual units. But again note that the predetermined overhead rates for normal costing and the standard overhead rates for standard costing are the same PER HOUR. However, the total overhead charged to each UNIT may differ between normal vs. standard costing.