Chapter 7

Variable Costing: A Tool for Management

True/False

1. Inthepreparationoffinancialstatementsusingvariablecosting,
T fixedmanufacturingoverheadistreatedasaperiodcost.
Easy

2. Directlaborisalwaysconsideredtobeaproductcostundervariable
F costing.
Hard

3. Undervariablecosting,theunitproductcostcontainssomefixed
F manufacturingoverheadcost.
Medium

4. Undervariablecostingitmaybepossibletoreportaprofitevenif
F thecompanysellslessthanthebreakevenvolumeofsales.
Medium

5. Undervariablecosting,theimpactoffixedcostisemphasizedbecause
T thetotalamountofsuchcostfortheperiodappearsintheincome
Easy statement.

6. Absorptioncostingtreatsfixedmanufacturingoverheadasaperiod
F cost,ratherthanasaproductcost.
Easy

7. Theunitproductcostunderabsorptioncostingcontainsnoelementof
F fixedmanufacturingoverheadcost.
Medium

8. Absorptioncostingtreatsallmanufacturingcostsasproductcosts.
T
Easy

9. Whenthenumberofunitsinworkinprocessandfinishedgoods
T inventoriesincrease,absorptioncostingnetincomewilltypicallybe
Easy greaterthanvariablecostingnetincome.

10. Whensalesexceedsproductionforaperiod,absorptioncostingnet
F incomewillgenerallybegreaterthanvariablecostingnetincome.
Easy

221ManagerialAccounting,9/e
11. Absorptioncostingnetincomeisclosertothenetcashflowofa
F periodthanisvariablecostingnetincome.
Medium

12. Variablecostingisnotpermittedforincometaxpurposes,butitis
F widelyacceptedforexternalfinancialreports.
Medium

13. Netincomeisnotaffectedbychangesinproductionwhenabsorption
F costingisused.
Medium

14. WhenJITmethodsareintroduced,thedifferenceinnetincomecomputed
T undertheabsorptionandvariablecostingmethodsisreduced.
Easy

15. Sincevariablecostingemphasizescostsbybehavior,itworkswell
T withcostvolumeprofitanalysis.
Easy

Multiple Choice

16. Acostthatwouldbeincludedinproductcostsunderbothabsorption
C costingandvariablecostingwouldbe:
Easy a.supervisorysalaries.
b.equipmentdepreciation.
c.variablemanufacturingcosts.
d.variablesellingexpenses.

17. Anallocatedportionoffixedmanufacturingoverheadisincludedin
C productcostsunder:
Easy
CPA AbsorptionVariable
costingcosting
adapted
a.NoNo
b.NoYes
c.YesNo
d.YesYes

18. Thevariablecostingmethodordinarilyincludesinproductcoststhe
B following:
Medium a.Directmaterialscost,directlaborcost,butno manufacturing
CPA overheadcost.
b.Directmaterialscost,directlaborcost,andvariable
adapted
manufacturingoverheadcost.
c.Primecostbutnotconversioncost.
d.Primecostandallconversioncost.

19. CayCompany'sfixedmanufacturingoverheadcoststotaled$100,000,and
D variablesellingcoststotaled$80,000.Undervariablecosting,how
Easy shouldthesecostsbeclassified?

PeriodcostsProductcosts
a.$0$180,000
b.$80,000$100,000
c.$100,000$80,000
d.$180,000$0

222ManagerialAccounting,9/e
20. Whichofthefollowingareconsideredtobeproductcostsunder
A variablecosting?
Easy
I.Variablemanufacturingoverhead.
II.Fixedmanufacturingoverhead.
III.Sellingandadministrativeexpenses.

a.I.
b.IandII.
c.IandIII.
d.I,II,andIII.

21. Whatfactoristhecauseofthedifferencebetweennetincomeas
B computedunderabsorptioncostingandnetincomeascomputedunder
Medium variablecosting?
CPA a.Absorptioncostingconsidersallmanufacturingcostsinthe
adapted determinationofnetincome,whereasvariablecosting considers
onlyprimecosts.
b.Absorptioncostingallocatesfixedmanufacturingcosts between
costofgoodssoldandinventories,andvariable costingconsiders
allfixedmanufacturingcostsasperiod costs.
c.Absorptioncostingincludesallvariablemanufacturingcosts in
productcosts,butvariablecostingconsidersvariable
manufacturingcoststobeperiodcosts.
d.Absorptioncostingincludesallfixedmanufacturingcostsin
productcosts,butvariablecostingexpensesallfixed
manufacturingcosts.

22. Undervariablecosting,costswhicharetreatedasperiodcosts
C include:
Easy a.onlyfixedmanufacturingcosts.
b.bothvariableandfixedmanufacturingcosts.
c.allfixedcosts.
d.onlyfixedsellingandadministrativecosts.

23. Whichofthefollowingstatementsistrueforafirmthatuses
C variablecosting?
Medium a.Theunitproductcostchangesasaresultofchangesinthe
numberofunitsmanufactured.
b.Bothvariablesellingcostsandvariableproductioncosts are
includedintheunitproductcost.
c.Netincomemovesinthesamedirectionassales.
d.Netincomeisgreatestinperiodswhenproductionis highest.

24. Whichofthefollowingareconsideredtobeproductcostsunder
B absorptioncosting?
Easy
I.Variablemanufacturingoverhead.
II.Fixedmanufacturingoverhead.
III.Sellingandadministrativeexpenses.

a.I,II,andIII.
b.IandII.
c.IandIII.
d.I.

25. Theterm"grossmargin"foramanufacturingcompanyreferstothe
C excessofsalesover

223ManagerialAccounting,9/e
Easy a.costofgoodssold,excludingfixedmanufacturingoverhead.
b.allvariablecosts,includingvariablesellingand
administrativeexpenses.
c.costofgoodssold,includingfixedmanufacturingoverhead.
d.variablecosts,excludingvariablesellingand administrative
expenses.

26. Netincomedeterminedusingfullabsorptioncostingcanbereconciled
A tonetincomedeterminedusingvariablecostingbycomputingthe
Medium differencebetween:
CPA a.Fixedmanufacturingoverheadcostsdeferredinorreleased from
adapted inventories.
b.Inventorieddiscretionarycostsinthebeginningandending
inventories.
c.Grossmargin(absorptioncostingmethod)andcontribution
margin(variablecostingmethod).
d.Salesasrecordedunderthevariablecostingmethodand salesas
recordedundertheabsorptioncostingmethod.

27. Netincomereportedunderabsorptioncostingwillexceednetincome
B reportedundervariablecostingforagivenperiodif:
Medium a.productionequalssalesforthatperiod.
CMA b.productionexceedssalesforthatperiod.
adapted c.salesexceedproductionforthatperiod.
d.thevariablemanufacturingoverheadexceedsthefixed
manufacturingoverhead.

28. Whatwillbethedifferenceinnetincomebetweenvariablecostingand
D absorptioncostingifthenumberofunitsinworkinprocessand
Medium finishedgoodsinventoriesincrease?
CPA a.Therewillbenodifferenceinnetincome.
adapted b.Netincomecomputedusingvariablecostingwillbehigher.
c.Thedifferenceinnetincomecannotbedeterminedfromthe
informationgiven.
d.Netincomecomputedusingvariablecostingwillbelower.

29. Thecostingmethodthatcanbeusedmosteasilywithbreakeven
A analysisandothercostvolumeprofittechniquesis:
Easy a.variablecosting.
b.absorptioncosting.
c.processcosting.
d.jobordercosting.

30. Forthemostrecentyear,AtlanticCompany'snetincomecomputedby
C theabsorptioncostingmethodwas$7,400,anditsnetincomecomputed
Hard bythevariablecostingmethodwas$10,100.Thecompany'sunitproduct
costwas$17undervariablecostingand$22underabsorptioncosting.
Iftheendinginventoryconsistedof1,460units,thebeginning
inventorymusthavebeen:
a.920units.
b.1,460units.
c.2,000units.
d.12,700units.

31. Duringthemostrecentyear,EvansCompanyhadanetincomeof$90,000
B usingabsorptioncostingand$84,000usingvariablecosting.Thefixed
Hard overheadapplicationratewas$6perunit.Therewerenobeginning

224ManagerialAccounting,9/e
 inventories.If22,000unitswereproducedlastyear,thensalesfor
lastyearwere:
a.15,000units.
b.21,000units.
c.23,000units.
d.28,000units.

32. Duringtheyearjustended,RobertsCompany'incomeunderabsorption
D costingwas$3,000lowerthanitsincomeundervariablecosting.The
Hard companysold9,000unitsduringtheyear,anditsvariablecostswere
$9perunit,ofwhich$3wasvariablesellingexpense.Ifproduction
costis$11perunitunderabsorptioncostingeveryyear,thenhow
manyunitsdidthecompanyproduceduringtheyear?
a.8,000.
b.10,000.
c.9,600.
d.8,400.

33. Lastyear,SilverCompany'svariableproductioncoststotaled$7,500
C anditsfixedmanufacturingoverheadcoststotaled$4,500.Thecompany
Hard produced3,000unitsduringtheyearandsold2,400units.Therewere
nounitsinthebeginninginventory.Whichofthefollowingstatements
istrue?
a.Undervariablecosting,theunitsintheendinginventory will
becostedat$4each.
b.Thenetincomeunderabsorptioncostingfortheyearwillbe $900
lowerthanthenetincomeundervariablecosting.
c.Theendinginventoryundervariablecostingwillbe$900
lowerthantheendinginventoryunderabsorptioncosting.
d.Underabsorptioncosting,theunitsinendinginventorywill be
costedat$2.50each.

34. Duringthelastyear,HansenCompanyhadnetincomeunderabsorption
D costingthatwas$5,500lowerthanitsincomeundervariablecosting.
Hard Thecompanysold9,000unitsduringtheyear,anditsvariablecosts
were$10perunit,ofwhich$6wasvariablesellingexpense.Iffixed
productioncostis$5perunitunderabsorptioncostingeveryyear,
thenhowmanyunitsdidthecompanyproduceduringtheyear?
a.7,625units.
b.8,450units.
c.10,100units.
d.7,900units.

35. IndianaCorporationproducesasingleproductthatitsellsfor$9per
B unit.Duringthefirstyearofoperations,100,000unitswereproduced
Medium and90,000unitsweresold.Manufacturingcostsandsellingand
CMA administrativeexpensesfortheyearwereasfollows:
adapted
FixedCostsVariableCosts
Rawmaterials............$1.75perunitproduced
Directlabor.............1.25perunitproduced
Factoryoverhead.........$100,0000.50perunitproduced
Sellingandadministrative70,0000.60perunitsold

WhatwasIndianaCorporation'snetincomefortheyearusingvariable
costing?
a.$181,000.
b.$271,000.

225ManagerialAccounting,9/e
 c.$281,000.
d.$371,000.

36. Lastyear,fixedmanufacturingoverheadwas$30,000,variable
C productioncostswere$48,000,fixedsellingandadministrationcosts
Medium were$20,000,andvariablesellingadministrativeexpenseswere
$9,600.Therewasnobeginninginventory.Duringtheyear,3,000units
wereproducedand2,400unitsweresoldatapriceof$40perunit.
Undervariablecosting,netincomewouldbe:
a.aprofitof$6,000.
b.aprofitof$4,000.
c.alossof$2,000.
d.alossof$4,400.

37. WestCo.'smanufacturingcostsareasfollows:
D
Easy Directmaterialsanddirectlabor.......$700,000
CPA Othervariablemanufacturingcosts......100,000
adapted Depreciationoffactorybuildingand
manufacturingequipment.............80,000
Otherfixedmanufacturingoverhead......18,000

Whatamountshouldbeconsideredproductcostsforexternalreporting
purposes?
a.$700,000.
b.$800,000.
c.$880,000.
d.$898,000.

38. Attheendoflastyear,LeeCompanyhad30,000unitsinitsending
C inventory.Lee'svariableproductioncostsare$10perunitandits
Hard fixedmanufacturingoverheadcostsare$5peruniteveryyear.The
company'snetincomefortheyearwas$12,000higherundervariable
costingthanunderabsorptioncosting.Giventhesefacts,thenumber
ofunitsofproductininventoryatthebeginningoftheyearmust
havebeen:
a.28,800units.
b.27,600units.
c.32,400units.
d.42,000units.

39. Duringthelastyear,MooreCompany'svariableproductioncosts
B totaled$10,000anditsfixedmanufacturingoverheadcoststotaled
Medium $6,800.Thecompanyproduced5,000unitsduringtheyearandsold
4,600units.Therewerenounitsinthebeginninginventory.Whichof
thefollowingstatementsistrue?
a.Thenetincomeunderabsorptioncostingfortheyearwillbe $800
higherthannetincomeundervariablecosting.
b.Thenetincomeunderabsorptioncostingfortheyearwillbe $544
higherthannetincomeundervariablecosting.
c.Thenetincomeunderabsorptioncostingfortheyearwillbe $544
lowerthannetincomeundervariablecosting.
d.Thenetincomeunderabsorptioncostingfortheyearwillbe $800
lowerthannetincomeundervariablecosting.

40. Lastyear,BenCompany'sincomeunderabsorptioncostingwas$4,400
B lowerthanitsincomeundervariablecosting.Thecompanysold8,000

226ManagerialAccounting,9/e
Hard unitsduringtheyear,anditsvariablecostswere$8perunit,of
which$3wasvariablesellingexpense.Fixedmanufacturingoverhead
was$1perunitinbeginninginventoryunderabsorptioncosting.How
manyunitsdidthecompanyproduceduringtheyear?
a.12,400units.
b.3,600units.
c.7,120units.
d.7,450units.

41. Lastyear,StephenCompanyhad20,000unitsinitsendinginventory.
C Duringtheyear,Stephen'svariableproductioncostswere$12per
Hard unit.Thefixedmanufacturingoverheadcostwas$8perunitinthe
beginninginventory.Thecompany'snetincomefortheyearwas$9,600
higherundervariablecostingthanitwasunderabsorptioncosting.
Giventhesefacts,thenumberofunitsofproductinthebeginning
inventorylastyearmusthavebeen:
a.21,200.
b.19,200.
c.18,800.
d.19,520.

Reference:71
AakerCompany,whichhasonlyoneproduct,hasprovidedthefollowingdataconcerning
itsmostrecentmonthofoperations:

Sellingprice............................$99

Unitsinbeginninginventory.............0
Unitsproduced...........................6,300
Unitssold...............................6,000
Unitsinendinginventory................300

Variablecostsperunit:
Directmaterials.......................$12
Directlabor...........................42
Variablemanufacturingoverhead........6
Variablesellingandadministrative....6

Fixedcosts:
Fixedmanufacturingoverhead...........$170,100
Fixedsellingandadministrative.......24,000

42. Whatistheunitproductcostforthemonthundervariablecosting?
D a.$66
Easy b.$93
ReferTo: c.$87
71 d.$60

43. Whatistheunitproductcostforthemonthunderabsorptioncosting?
A a.$87
Easy b.$60
ReferTo: c.$66
71 d.$93

227ManagerialAccounting,9/e
44. Thetotalcontributionmarginforthemonthunderthevariablecosting
D approachis:
Medium a.$72,000.
ReferTo: b.$27,900.
71 c.$234,000.
d.$198,000.

45. Thetotalgrossmarginforthemonthundertheabsorptioncosting
C approachis:
Medium a.$98,100.
ReferTo: b.$198,000.
71 c.$72,000.
d.$12,000.

46. Whatisthetotalperiodcostforthemonthunderthevariablecosting
A approach?
Hard a.$230,100
ReferTo: b.$194,100
71 c.$170,100
d.$60,000

47. Whatisthetotalperiodcostforthemonthundertheabsorption
B costingapproach?
Hard a.$170,100
ReferTo: b.$60,000
71 c.$230,100
d.$24,000

48. Whatisthenetincomeforthemonthundervariablecosting?
B a.$8,100
Medium b.$3,900
ReferTo: c.$12,000
71 d.($14,100)

49. Whatisthenetincomeforthemonthunderabsorptioncosting?
C a.$3,900
Medium b.($14,100)
ReferTo: c.$12,000
71 d.$8,100

Reference:72
Lastyear,WalshCompanymanufactured25,000unitsandsold22,000units.Production
costswereasfollows:

Directmaterial..................$100,000
Directlabor.....................75,000
Variablemanufacturingoverhead..50,000
Fixedmanufacturingoverhead.....75,000

Salestotaled$440,000,variablesellingandadministrativeexpenseswere$110,000,
andfixedsellingandadministrativeexpenseswere$45,000.Therewasnobeginning
inventory.Assumethatdirectlaborisavariablecost.

50. Underabsorptioncosting,theunitproductcostwouldbe:
B a.$9.00.
Easy b.$12.00.
ReferTo: c.$13.40.

228ManagerialAccounting,9/e
72 d.$14.00.

51. Underabsorptioncosting,thegrossmarginwouldbe:
A a.$176,000.
Medium b.$242,000.
ReferTo: c.$66,000.
72 d.$21,000.

52. Thecontributionmarginperunitwouldbe:
D a.$15.00.
Medium b.$11.00.
ReferTo: c.$8.00.
72 d.$6.00.

53. Undervariablecosting,thetotalamountoffixedmanufacturingcost
A intheendinginventorywouldbe:
Easy a.$0.
ReferTo: b.$9,000.
72 c.$14,400.
d.$27,000.

54. Thenetincomeundervariablecostingwouldbe:
C a.$2,000.
Medium b.$21,000.
ReferTo: c.$12,000.
72 d.$9,000.

229ManagerialAccounting,9/e
55. Thenetincomeunderabsorptioncostingwouldbe:
D a.$9,000.
Medium b.$12,000.
ReferTo: c.$2,000.
72 d.$21,000.

Reference:73
FarronCompany,whichhasonlyoneproduct,hasprovidedthefollowingdata
concerningitsmostrecentmonthofoperations:

Sellingprice............................$92

Unitsinbeginninginventory.............0
Unitsproduced...........................8,700
Unitssold...............................8,300
Unitsinendinginventory................400

Variablecostsperunit:
Directmaterials.......................$13
Directlabor...........................55
Variablemanufacturingoverhead........1
Variablesellingandadministrative....5

Fixedcosts:
Fixedmanufacturingoverhead...........$130,500
Fixedsellingandadministrative.......8,300

56. Whatistheunitproductcostforthemonthundervariablecosting?
A a.$69
Easy b.$84
ReferTo: c.$89
73 d.$74

57. Whatistheunitproductcostforthemonthunderabsorptioncosting?
D a.$74
Easy b.$89
ReferTo: c.$69
73 d.$84

58. Whatisthenetincomeforthemonthundervariablecosting?
A a.$10,600
Medium b.($17,000)
ReferTo: c.$16,600
73 d.$6,000

59. Whatisthenetincomeforthemonthunderabsorptioncosting?
B a.($17,000)
Medium b.$16,600
ReferTo: c.$6,000
73 d.$10,600

Reference:74
JarvixCompany,whichhasonlyoneproduct,hasprovidedthefollowingdata
concerningitsmostrecentmonthofoperations:

Sellingprice............................$111

230ManagerialAccounting,9/e
Unitsinbeginninginventory.............400
Unitsproduced...........................8,800
Unitssold...............................8,900
Unitsinendinginventory................300

Variablecostsperunit:
Directmaterials.......................$34
Directlabor...........................37
Variablemanufacturingoverhead........3
Variablesellingandadministrative....9

Fixedcosts:
Fixedmanufacturingoverhead...........$61,600
Fixedsellingandadministrative.......169,100

Thecompanyproducesthesamenumberofunitseverymonth,althoughthesalesin
unitsvaryfrommonthtomonth.Thecompany'svariablecostsperunitandtotalfixed
costshavebeenconstantfrommonthtomonth.

60. Whatistheunitproductcostforthemonthundervariablecosting?
B a.$83
Medium b.$74
ReferTo: c.$90
74 d.$81

61. Whatistheunitproductcostforthemonthunderabsorptioncosting?
C a.$90
Medium b.$74
ReferTo: c.$81
74 d.$83

62. Whatisthenetincomeforthemonthundervariablecosting?
D a.$25,900
Medium b.$2,100
ReferTo: c.$17,800
74 d.$18,500

63. Whatisthenetincomeforthemonthunderabsorptioncosting?
D a.$2,100
Medium b.$25,900
ReferTo: c.$18,500
74 d.$17,800

Reference:75
HatfieldCompany,whichhasonlyoneproduct,hasprovidedthefollowingdata
concerningitsmostrecentmonthofoperations:

Sellingprice............................$123

Unitsinbeginninginventory.............0
Unitsproduced...........................6,400
Unitssold...............................6,100
Unitsinendinginventory................300

Variablecostsperunit:
Directmaterials.......................$45

231ManagerialAccounting,9/e
Directlabor...........................30
Variablemanufacturingoverhead........1
Variablesellingandadministrative....8

Fixedcosts:
Fixedmanufacturingoverhead...........$140,800
Fixedsellingandadministrative.......91,500

64. Whatistheunitproductcostforthemonthundervariablecosting?
C a.$98
Easy b.$84
ReferTo: c.$76
75 d.$106

65. Thetotalcontributionmarginforthemonthunderthevariablecosting
A approachis:
Medium a.$237,900.
ReferTo: b.$97,100.
75 c.$152,500.
d.$286,700.

66. Whatisthetotalperiodcostforthemonthunderthevariablecosting
D approach?
Hard a.$140,300
ReferTo: b.$140,800
75 c.$232,300
d.$281,100

67. Whatisthenetincomeforthemonthundervariablecosting?
B a.$6,600
Medium b.$5,600
ReferTo: c.($17,200)
75 d.$12,200

Reference:76
IancuCompany,whichhasonlyoneproduct,hasprovidedthefollowingdataconcerning
itsmostrecentmonthofoperations:

Sellingprice............................$149

Unitsinbeginninginventory.............0
Unitsproduced...........................4,200
Unitssold...............................3,900
Unitsinendinginventory................300

Variablecostsperunit:
Directmaterials.......................$27
Directlabor...........................46
Variablemanufacturingoverhead........5
Variablesellingandadministrative....9

Fixedcosts:
Fixedmanufacturingoverhead...........$155,400
Fixedsellingandadministrative.......70,200

68. Whatistheunitproductcostforthemonthundervariablecosting?
C a.$124

232ManagerialAccounting,9/e
Easy b.$115
ReferTo: c.$78
76 d.$87

69. Whatisthenetincomeforthemonthundervariablecosting?
B a.$27,300
Medium b.$16,200
ReferTo: c.($7,200)
76 d.$11,100

233ManagerialAccounting,9/e
Reference:77
ThePacificCompanymanufacturesasingleproduct.Thefollowingdatarelatetothe
yearjustcompleted:

Variablecostperunit:
Production....................$43
Sellingandadministrative....$15

Fixedcostsintotal:
Production....................$145,000
Sellingandadministrative....$95,000

Duringthelastyear,5,000unitswereproducedand4,800unitsweresold.Therewere
nobeginninginventories.

70. Undervariablecosting,theunitproductcostwouldbe:
D a.$91.00.
Easy b.$72.00.
ReferTo: c.$58.00.
77 d.$43.00.

71. Thecarryingvalueoffinishedgoodsinventoryattheendoftheyear
C undervariablecostingwouldbe:
Medium a.$8,800greaterthanunderabsorptioncosting.
ReferTo: b.$8,800lessthanunderabsorptioncosting.
77 c.$5,800lessthanunderabsorptioncosting.
d.Thesameasabsorptioncosting.

72. Underabsorptioncosting,thecostofgoodssoldfortheyearwould
B be:
Medium a.$206,400.
ReferTo: b.$345,600.
77 c.$278,400.
d.$360,000.

Reference:78
CrystalCompany'svariablecostingincomestatementforthemonthofMayappears
below:

CrystalCompany
IncomeStatement
ForthemonthendedMay31

Sales($10perunit)..............$900,000
Lessvariablecosts:
Variablecostofgoodssold:
Beginninginventory.........$125,000
Addvariablecostofgoods
manufactured..............400,000
GoodsavailableforSale....525,000
Lessendinginventory.......75,000
Variablecostofgoodssold.450,000
Variablesellingexpense.....90,000
Totalvariablecosts.....540,000
Contributionmargin...............360,000
Fixedcosts:
Fixedmanufacturingoverhead...240,000
Fixedsellingandadmin........90,000

234ManagerialAccounting,9/e
Totalfixedcosts........330,000
Netincome........................$30,000

Thecompanyproduces80,000unitseachmonth.Variableproductioncostsperunitand
totalfixedcostshaveremainedconstantoverthepastseveralmonths.

73. Thedollarvalueofthecompany'sinventoryonMay31underthe
A absorptioncostingmethodwouldbe:
Hard a.$120,000.
ReferTo: b.$90,000.
78 c.$75,000.
d.$60,000.

74. Underabsorptioncosting,forthemonthendedMay31,thecompany
B wouldreporta:
Hard a.$30,000loss.
ReferTo: b.$0profit.
78 c.$30,000profit.
d.$60,000profit.

Reference:79
ThefollowingdatawereprovidedbyGreenEnterprisesforthemostrecentperiod:

Unitsinbeginninginventory........0
Unitsproduced......................8,000
Unitssold..........................6,000

Variablecostsperunit:
Manufacturing.....................$15
Sellingandadministrative........5
Fixedcosts,intotal:
Manufacturing.....................$24,000
Sellingandadministrative........16,000

75. Undervariablecosting,theunitproductcostis:
C a.$20.
Easy b.$18.
ReferTo: c.$15.
79 d.$22.

76. Underabsorptioncosting,theunitproductcostis:
B a.$20.
Easy b.$18.
ReferTo: c.$15.
79 d.$25.

77. Fortheperiodabove,onewouldexpectthenetincomeunderabsorption
A costingtobe:
Easy a.higherthanthenetincomeundervariablecosting.
ReferTo: b.lowerthanthenetincomeundervariablecosting.
79 c.thesameasthenetincomeundervariablecosting.
d.Therelationbetweenabsorptioncostingnetincomeand variable
costingnetincomecannotbedetermined.

Reference:710
Thefollowingdatapertaintoonemonth'soperationsofWhitney,Inc.:

235ManagerialAccounting,9/e
Unitsinbeginninginventory.......0
Unitsproduced.....................9,000
Unitssold.........................8,000

Variablecostsperunit:
Manufacturing....................$10
Sellingandadministrative.......6
Fixedcostsintotal:
Manufacturing....................$18,000
Sellingandadministrative.......27,000

78. Thecarryingvalueonthebalancesheetoftheendingfinishedgoods
B inventoryundervariablecostingwouldbe:
Easy a.$16,000.
ReferTo: b.$10,000.
710 c.$19,000.
d.$12,000.

79. Thecarryingvalueonthebalancesheetoftheendingfinishedgoods
C inventoryunderabsorptioncostingwouldbe:
Easy a.$16,000.
ReferTo: b.$10,000.
710 c.$12,000.
d.$21,000.

80. Forthemonthreferredtoabove,netincomeundervariablecosting
B willbe:
Medium a.higherthannetincomeunderabsorptioncosting.
ReferTo: b.lowerthannetincomeunderabsorptioncosting.
710 c.thesameasnetincomeunderabsorptioncosting.
d.Therelationbetweenvariablecostingandabsorptioncosting net
incomecannotbedetermined.

Reference:711
BatemanCompany,whichhasonlyoneproduct,hasprovidedthefollowingdata
concerningitsmostrecentmonthofoperations:

Sellingprice............................$117

Unitsinbeginninginventory.............0
Unitsproduced...........................4,700
Unitssold...............................4,400
Unitsinendinginventory................300

Variablecostsperunit:
Directmaterials.......................$36
Directlabor...........................38
Variablemanufacturingoverhead........4
Variablesellingandadministrative....11

Fixedcosts:
Fixedmanufacturingoverhead...........$89,300
Fixedsellingandadministrative.......26,400

81. Whatistheunitproductcostforthemonthundervariablecosting?
D a.$89
Easy b.$97

236ManagerialAccounting,9/e
ReferTo: c.$108
711 d.$78

82. Whatistheunitproductcostforthemonthunderabsorptioncosting?
A a.$97
Easy b.$108
ReferTo: c.$78
711 d.$89

Reference:712
Duringthelastyear,SnyderCo.produced10,000unitsofProductS.Costsincurred
bySnyderduringtheyearwereasfollows:

Directmaterials...................$11,000
Directlabor.......................21,000
Variablemanufacturingoverhead....6,100
Variablesellingandgeneral.......3,100
Fixedmanufacturingoverhead.......9,000
Fixedsellingandgeneral..........4,100
Total..............................$54,300

83. Theunitproductcostunderabsorptioncostingwouldhavebeen:
C a.$5.43.
Medium b.$3.81.
ReferTo: c.$4.71.
712 d.$4.12.

84. Theunitproductcostundervariablecostingwouldhavebeen:
B a.$3.20.
Medium b.$3.81.
ReferTo: c.$4.12.
712 d.$3.51.

Reference:713
Duringthepastyear,CarrCompanymanufactured25,000unitsandsold20,000units.
Productioncostsfortheyearwereasfollows:

Fixedmanufacturingoverhead......$250,000
Variablemanufacturingoverhead...$210,000
Directlabor......................$120,000
Directmaterials..................$180,000

Salestotaled$850,000,variablesellingexpensestotaled$110,000,andfixedselling
andadministrativeexpensestotaled$170,000.Therewerenounitsinbeginning
inventory.Assumethatdirectlaborisavariablecost.

85. Thecontributionmarginperunitwouldbe:
D a.$12.10.
Medium b.$22.10.
ReferTo: c.$17.70.
713 d.$16.60.

237ManagerialAccounting,9/e
86. Underabsorptioncosting,theendinginventoryfortheyearwouldbe
D valuedat:
Medium a.$179,500.
ReferTo: b.$213,500.
713 c.$222,000.
d.$152,000.

87. Thenetincomefortheyearundervariablecostingwouldbe:
C a.$28,000lowerthanunderabsorptioncosting.
Medium b.$28,000higherthanunderabsorptioncosting.
ReferTo: c.$50,000lowerthanunderabsorptioncosting.
713 d.$50,000higherthanunderabsorptioncosting.

Reference:714
Lastyear,HarrisCompanymanufactured17,000unitsandsold13,000units.Production
costsfortheyearwereasfollows:

Directmaterials......................$153,000
Directlabor..........................110,500
Variablemanufacturingoverhead.......204,000
Fixedmanufacturingoverhead..........255,000

Saleswere$780,000fortheyear,variablesellingandadministrativeexpenseswere
$88,400,andfixedsellingandadministrativeexpenseswere$170,000.Therewasno
beginninginventory.Assumethatdirectlaborisavariablecost.

88. Thecontributionmarginperunitwas:
D a.$17.50.
Medium b.$32.50.
ReferTo: c.$27.30.
714 d.$25.70.

89. Underabsorptioncosting,thecarryingvalueonthebalancesheetof
B theendinginventoryfortheyearwouldbe:
Medium a.$190,800.
ReferTo: b.$170,000.
714 c.$230,800.
d.$0.

90. Undervariablecosting,thecompany'snetincomefortheyearwould
d be:
Hard a.$60,000higherthanunderabsorptioncosting.
ReferTo: b.$108,000higherthanunderabsorptioncosting.
714 c.$108,000lowerthanunderabsorptioncosting.
d.$60,000lowerthanunderabsorptioncosting.

Reference:715
FaheyCompanymanufacturesasingleproductwhichitsellsfor$25perunit.The
companyhasthefollowingcoststructure:

Variablecostsperunit:
Manufacturing....................$9
SellingandAdministrative.......3
Fixedcostsintotal:
Manufacturing....................$72,000
SellingandAdministrative.......54,000

238ManagerialAccounting,9/e
Therewerenounitsinbeginninginventory.Duringtheyear,18,000unitswere
producedand15,000unitsweresold.

91. Underabsorptioncosting,theunitproductcostwouldbe:
C a.$9.
Easy b.$12.
ReferTo: c.$13.
715 d.$16.

92. Thecompany'snetincomefortheyearundervariablecostingwouldbe:
D a.$60,000.
Medium b.$81,000.
ReferTo: c.$57,000.
715 d.$69,000.

Reference:716
ErieCompanymanufacturesasingleproduct.Assumethefollowingdatafortheyear
justcompleted:

Fixedcostsintotal:
SellingandAdministrative...$60,000
Production...................$82,500

Variablecostsperunit:
SellingandAdministrative...$5
Production...................$8

Therewerenounitsininventoryatthebeginningoftheyear.Duringtheyear30,000
unitswereproducedand25,000unitsweresold.Eachunitsellsfor$35.

93. Underabsorptioncosting,theunitproductcostwouldbe:
D a.$8.
Easy b.$17.75.
ReferTo: c.$13.
716 d.$10.75.

94. Thecompany'snetincomeundervariablecostingwouldbe:
A a.$407,500.
Medium b.$421,250.
ReferTo: c.$431,250.
716 d.$417,500.

Reference:717
ChownCompany,whichhasonlyoneproduct,hasprovidedthefollowingdataconcerning
itsmostrecentmonthofoperations:

Sellingprice............................$110

Unitsinbeginninginventory.............0
Unitsproduced...........................8,000
Unitssold...............................7,800
Unitsinendinginventory................200

Variablecostsperunit:
Directmaterials.......................$22

239ManagerialAccounting,9/e
Directlabor...........................31
Variablemanufacturingoverhead........3
Variablesellingandadministrative....4

Fixedcosts:
Fixedmanufacturingoverhead...........$248,000
Fixedsellingandadministrative.......140,400

95. Thetotalcontributionmarginforthemonthunderthevariablecosting
B approachis:
Medium a.$179,400.
ReferTo: b.$390,000.
717 c.$421,200.
d.$142,000.

96. Thetotalgrossmarginforthemonthundertheabsorptioncosting
B approachis:
Medium a.$196,800.
ReferTo: b.$179,400.
717 c.$390,000.
d.$7,800.

240ManagerialAccounting,9/e
Reference:718
DelvinCompany,whichhasonlyoneproduct,hasprovidedthefollowingdata
concerningitsmostrecentmonthofoperations:

Sellingprice............................$120

Unitsinbeginninginventory.............0
Unitsproduced...........................1,800
Unitssold...............................1,500
Unitsinendinginventory................300

Variablecostsperunit:
Directmaterials.......................$40
Directlabor...........................42
Variablemanufacturingoverhead........2
Variablesellingandadministrative....9

Fixedcosts:
Fixedmanufacturingoverhead...........$7,200
Fixedsellingandadministrative.......28,500

97. Whatisthetotalperiodcostforthemonthunderthevariablecosting
B approach?
Hard a.$42,000
ReferTo: b.$49,200
718 c.$35,700
d.$7,200

98. Whatisthetotalperiodcostforthemonthundertheabsorption
A costingapproach?
Hard a.$42,000
ReferTo: b.$7,200
718 c.$49,200
d.$28,500

Reference:719
GabbertCompany,whichhasonlyoneproduct,hasprovidedthefollowingdata
concerningitsmostrecentmonthofoperations:

Sellingprice............................$90

Unitsinbeginninginventory.............0
Unitsproduced...........................3,600
Unitssold...............................3,400
Unitsinendinginventory................200

Variablecostsperunit:
Directmaterials.......................$23
Directlabor...........................11
Variablemanufacturingoverhead........2
Variablesellingandadministrative....8

Fixedcosts:
Fixedmanufacturingoverhead...........$93,600
Fixedsellingandadministrative.......61,200

99. Thetotalcontributionmarginforthemonthunderthevariablecosting

241ManagerialAccounting,9/e
D approachis:
Medium a.$62,800.
ReferTo: b.$95,200.
719 c.$183,600.
d.$156,400.

100. Thetotalgrossmarginforthemonthundertheabsorptioncosting
A approachis:
Medium a.$95,200.
ReferTo: b.$156,400.
719 c.$6,800.
d.$107,600.

101. Whatisthetotalperiodcostforthemonthunderthevariablecosting
D approach?
Hard a.$93,600
ReferTo: b.$154,800
719 c.$88,400
d.$182,000

102. Whatisthetotalperiodcostforthemonthundertheabsorption
A costingapproach?
Hard a.$88,400
ReferTo: b.$182,000
719 c.$61,200
d.$93,600

Reference:720
GordonCompanyproducesasingleproductthatsellsfor$10perunit.Lastyearthere
werenobeginninginventories,100,000unitswereproduced,and80,000unitswere
sold.Thecompanyhasthefollowingcoststructure:

FixedcostsVariablecosts
Rawmaterials................$2.00perunitproduced
Directlabor.................1.25perunitproduced
Factoryoverhead.............$120,0000.75perunitproduced
Sellingandadministrative...70,0001.00perunitsold

103. Netincomeundervariablecostingwouldbe:
B a.$114,000.
Medium b.$210,000.
ReferTo: c.$234,000.
720 d.$330,000.

104. Thecarryingvalueonthebalancesheetoftheendingfinishedgoods
B inventoryunderabsorptioncostingwouldbe:
Medium a.$80,000.
ReferTo: b.$104,000.
720 c.$110,000.
d.$124,000.

Reference:721
ElliotCompany,whichhasonlyoneproduct,hasprovidedthefollowingdata
concerningitsmostrecentmonthofoperations:

Sellingprice............................$112

242ManagerialAccounting,9/e
Unitsinbeginninginventory.............0
Unitsproduced...........................4,900
Unitssold...............................4,500
Unitsinendinginventory................400

Variablecostsperunit:
Directmaterials.......................$19
Directlabor...........................45
Variablemanufacturingoverhead........6
Variablesellingandadministrative....9

Fixedcosts:
Fixedmanufacturingoverhead...........$117,600
Fixedsellingandadministrative.......22,500

105. Whatisthenetincomeforthemonthundervariablecosting?
D a.$18,000
Medium b.($19,600)
ReferTo: c.$9,600
721 d.$8,400

106. Whatisthenetincomeforthemonthunderabsorptioncosting?
D a.($19,600)
Medium b.$9,600
ReferTo: c.$8,400
721 d.$18,000

Reference:722
KhanamCompany,whichhasonlyoneproduct,hasprovidedthefollowingdata
concerningitsmostrecentmonthofoperations:

Sellingprice............................$97

Unitsinbeginninginventory.............500
Unitsproduced...........................8,400
Unitssold...............................8,500
Unitsinendinginventory................400

Variablecostsperunit:
Directmaterials.......................$20
Directlabor...........................37
Variablemanufacturingoverhead........1
Variablesellingandadministrative....11

Fixedcosts:
Fixedmanufacturingoverhead...........$67,200
Fixedsellingandadministrative.......161,500

Thecompanyproducesthesamenumberofunitseverymonth,althoughthesalesin
unitsvaryfrommonthtomonth.Thecompany'svariablecostsperunitandtotalfixed
costshavebeenconstantfrommonthtomonth.

107. Whatisthenetincomeforthemonthundervariablecosting?
B a.$8,500
Medium b.$9,300
ReferTo: c.$3,200
722 d.$15,100

243ManagerialAccounting,9/e
108. Whatisthenetincomeforthemonthunderabsorptioncosting?
A a.$8,500
Medium b.$9,300
ReferTo: c.$3,200
722 d.$15,100

244ManagerialAccounting,9/e
Reference:723
DeAnneCompany'svariablecostingincomestatementforAugustappearsbelow:

DeAnneCompany
IncomeStatement
ForthemonthendedAugust31

Sales($15perunit)................$600,000
Lessvariablecosts:
Variablecostofgoodssold:
Beginninginventory..............$72,000
Addvariablecostof
goodsmanufactured.............315,000
Goodsavailableforsale.........387,000
Lessendinginventory............27,000
Variablecostofgoodssold......360,000
Variablesellingexpense.........80,000
Totalvariablecosts..........440,000
Contributionmargin.................160,000
Fixedcosts:
Fixedmanufacturing..............105,000
Fixedsellingandadministrative.35,000
Totalfixedcosts.............140,000
Netincome..........................$20,000

Thecompanyproduces35,000unitseachmonth.Variableproductioncostsperunitand
totalfixedcostshaveremainedconstantoverthepastseveralmonths.

109. Thedollarvalueofthecompany'sinventoryonAugust31underthe
C absorptioncostingmethodwouldbe:
Hard a.$27,000.
ReferTo: b.$42,000.
723 c.$36,000.
d.$47,000.

110. Underabsorptioncosting,forthemonthendedAugust31,thecompany
D wouldreporta:
Hard a.$20,000profit.
ReferTo: b.$5,000loss.
723 c.$35,000profit.
d.$5,000profit.

Essay

111. LeeCompany,whichhasonlyoneproduct,hasprovidedthefollowingdata
Hard concerningitsmostrecentmonthofoperations:

Sellingprice............................$95

Unitsinbeginninginventory.............100
Unitsproduced...........................6,200
Unitssold...............................5,900
Unitsinendinginventory................400

Variablecostsperunit:
Directmaterials.......................$42
Directlabor...........................28
Variablemanufacturingoverhead........1

245ManagerialAccounting,9/e
 Variablesellingandadministrative....5

Fixedcosts:
Fixedmanufacturingoverhead...........$62,000
Fixedsellingandadministrative.......35,400

Thecompanyproducesthesamenumberofunitseverymonth,althoughthe
salesinunitsvaryfrommonthtomonth.Thecompany'svariablecosts
perunitandtotalfixedcostshavebeenconstantfrommonthtomonth.

Required:
a.Whatistheunitproductcostforthemonthundervariable
costing?
b.Whatistheunitproductcostforthemonthunderabsorption
costing?
c.Prepareanincomestatementforthemonthusingthe contribution
formatandthevariablecostingmethod.
d.Prepareanincomestatementforthemonthusingthe absorption
costingmethod.
e.Reconcilethevariablecostingandabsorptioncostingnet
incomesforthemonth.

Answer:
a.&b.Unitproductcosts

Variablecosting:

Directmaterials.......................$42
Directlabor...........................28
Variablemanufacturingoverhead........1
Unitproductcost......................$71

Absorptioncosting:
Directmaterials.......................$42
Directlabor...........................28
Variablemanufacturingoverhead........1
Fixedmanufacturingoverhead...........10
Unitproductcost......................$81

c.&d.Incomestatements

Variablecostingincomestatement
Sales......................................$560,500
Lessvariableexpenses:
Variablecostofgoodssold:
Beginninginventory....................$7,100
Addvariablemanufacturingcosts.......440,200
Goodsavailableforsale...............447,300
Lessendinginventory..................28,400
Variablecostofgoodssold............418,900
Variablesellingandadministrative....29,500448,400
Contributionmargin........................112,100
Lessfixedexpenses:
Fixedmanufacturingoverhead...........62,000
Fixedsellingandadministrative.......35,40097,400
Netincome.................................$14,700

Absorptioncostingincomestatement

246ManagerialAccounting,9/e
 Sales......................................$560,500
Costofgoodssold:
Beginninginventory......................$8,100
Addcostofgoodsmanufactured...........502,200
Goodsavailableforsale.................510,300
Lessendinginventory....................32,400477,900

Grossmargin...............................82,600
Lesssellingandadministrativeexpenses:
Variablesellingandadministrative......29,500
Fixedsellingandadministrative.........35,40064,900
Netincome.................................$17,700

e.Reconciliation
Variablecostingnetincome................$14,700
Addfixedmanufacturingoverheadcosts
deferredininventoryunderabsorption
costing..................................3,000
Deductfixedmanufacturingoverheadcosts
releasedfrominventoryunderabsorption
costing..................................0
Absorptioncostingnetincome..............$17,700

112. MahughCompany,whichhasonlyoneproduct,hasprovidedthefollowing
Medium dataconcerningitsmostrecentmonthofoperations:

Sellingprice..............................$122
Unitsinbeginninginventory.............0
Unitsproduced...........................8,300
Unitssold...............................8,200
Unitsinendinginventory................100

Variablecostsperunit:
Directmaterials.......................$27
Directlabor...........................46
Variablemanufacturingoverhead........4
Variablesellingandadministrative....7

Fixedcosts:
Fixedmanufacturingoverhead...........$199,200
Fixedsellingandadministrative.......106,600

Required:

a.Whatistheunitproductcostforthemonthundervariable
costing?
b.Whatistheunitproductcostforthemonthunderabsorption
costing?
c.Prepareanincomestatementforthemonthusingthe contribution
formatandthevariablecostingmethod.
d.Prepareanincomestatementforthemonthusingthe absorption
costingmethod.
e.Reconcilethevariablecostingandabsorptioncostingnet
incomesforthemonth.

247ManagerialAccounting,9/e
 Answer:

a.&b.Unitproductcosts

Variablecosting:
Directmaterials.....................$27
Directlabor.........................46
Variablemanufacturingoverhead......4
Unitproductcost....................$77

Absorptioncosting:
Directmaterials.....................$27
Directlabor.........................46
Variablemanufacturingoverhead......4
Fixedmanufacturingoverhead.........24
Unitproductcost....................$101

c.&d.Incomestatements

Variablecostingincomestatement
Sales....................................$1,000,400
Lessvariableexpenses:
Variablecostofgoodssold:
Beginninginventory..................$0
Addvariablemanufacturingcosts.....639,100
Goodsavailableforsale.............639,100
Lessendinginventory................7,700
Variablecostofgoodssold..........631,400
Variablesellingandadministrative..57,400688,800
Contributionmargin......................311,600
Lessfixedexpenses:
Fixedmanufacturingoverhead.........199,200
Fixedsellingandadministrative.....106,600305,800
Netincome...............................$5,800

Absorptioncostingincomestatement
Sales....................................$1,000,400
Costofgoodssold:
Beginninginventory....................$0
Addcostofgoodsmanufactured.........838,300
Goodsavailableforsale...............838,300
Lessendinginventory..................10,100828,200
Grossmargin.............................172,200
Lesssellingandadministrativeexpenses:
Variablesellingandadministrative....57,400
Fixedsellingandadministrative.......106,600164,000
Netincome...............................$8,200

e.Reconciliation
Variablecostingnetincome................$5,800
Addfixedmanufacturingoverheadcosts
deferredininventoryunderabsorption
costing..................................2,400
Deductfixedmanufacturingoverheadcosts
releasedfrominventoryunderabsorption
costing..................................0

Absorptioncostingnetincome..............$8,200

248ManagerialAccounting,9/e
113. TheEGCompanyproducesandsellsoneproductamicrowaveoven.The
Medium followingdatarefertotheyearjustcompleted:

Beginninginventory.......................$0
Unitsproduced............................25,000
Unitssold................................20,000
Salespriceperunit......................$400
Sellingandadministrativeexpenses:
Variableperunit......................$15
Fixed(total)..........................$275,000
Manufacturingcosts:
Directmaterialscostperunit.........$200
Directlaborcostperunit.............$50
Variableoverheadcostperunit........$30
Fixedoverhead(total).................$300,000

Assumethatdirectlaborisavariablecost.

Required:

a.Computethecostofasingleunitofproductunderboththe
absorptioncostingandvariablecostingapproaches.
b.Prepareanincomestatementfortheyearusingabsorption
costing.
c.Prepareanincomestatementfortheyearusingvariable costing.
d.Reconciletheabsorptioncostingandvariablecostingnet
incomefiguresin(b)and(c)above.

Answer:

a.Costperunitunderabsorptioncosting:
Directmaterials....................$200
Directlabor........................50
Variableoverhead...................30
Fixedoverhead($300,00025,000)..12
Totalcostperunit.................$292

Costperunitundervariablecosting:
Directmaterials....................$200
Directlabor........................50
Variableoverhead...................30
Totalcostperunit.................$280

b.Absorptioncostingincomestatement:

Sales...............................$8,000,000
Costofgoodssold:
Beginninginventory.................$0
Costofgoodsmanufactured
(25,000@$292)7,300,000
Costofgoodsavailable.............7,300,000
Lessendinginventory
(5,000units@$292).............1,460,0005,840,000
Grossprofit........................2,160,000
Lesssellingandadministrativeexpenses:
[($15x20,000)+$275,000].......575,000
Netincome..........................$1,585,000

249ManagerialAccounting,9/e
 c.Variablecostingincomestatement:

Sales...............................$8,000,000
Costofgoodssold:
Beginninginventory.................$0
Costofgoodsmanufactured
(25,000@$280)7,000,000
Costofgoodsavailable.............7,000,000
Lessendinginventory
(5,000units@$280)1,400,000
Variablecostofgoodssold.........5,600,000
Variablesellingandadmin.expenses:
(20,000x$15).................300,0005,900,000
Contributionmargin.................2,100,000
Lessfixedexpenses:
Manufacturingoverhead..............300,000
Sellingandadministrative..........275,000575,000
Netincome..........................$1,525,000

d.
Netincomeundervariablecosting...$1,525,000
Addfixedmanufacturingoverhead
costsdeferredininventory
underabsorptioncosting
(5,000unitsX$12)..............60,000
Netincomeunderabsorptioncosting$1,585,000
114. TheDeanCompanyproducesandsellsasingleproductamicrowaveoven.
Medium Thefollowingdatarefertotheyearjustcompleted:

Beginninginventory....................$0
Unitsproduced.........................20,000
Unitssold.............................19,000
Salespriceperunit...................$350
Sellingandadministrativeexpenses:
Variableperunit....................$10
Fixed(total)........................$225,000
Manufacturingcosts:
Directmaterialscostperunit.......$190
Directlaborcostperunit...........$40
Variableoverheadcostperunit......$25
Fixedoverhead(total)...............$250,000

Assumethatdirectlaborisavariablecost.

Required:

a.Computethecostofasingleunitofproductunderboththe
absorptioncostingandvariablecostingapproaches.
b.Prepareanincomestatementfortheyearusingabsorption
costing.
c.Prepareanincomestatementfortheyearusingvariable costing.
d.Reconciletheabsorptioncostingandvariablecostingnet
incomefiguresin(b)and(c)above.

250ManagerialAccounting,9/e
 Answer:

a.Costperunitunderabsorptioncosting:

Directmaterials....................$190.00
Directlabor........................40.00
Variableoverhead...................25.00
Fixedoverhead($250,00020,000)..12.50
Totalcostperunit.................$267.50

Costperunitundervariablecosting:
Directmaterials....................$190.00
Directlabor........................40.00
Variableoverhead...................25.00
Totalcostperunit.................$255.00

b.Absorptioncostingincomestatement:

Sales.................................$6,650,000
Costofgoodssold:
Beginninginventory...................$0
Costofgoodsmanufactured
(20,000@$267.50).................5,350,000
Costofgoodsavailable...............5,350,000
Lessendinginventory
(1,000units@$267.50)............267,5005,082,500
Grossprofit..........................1,567,500
Lesssellingandadministrativeexpenses:
[($10x19,000)+$225,000].........415,000
Netincome............................$1,152,500

c.Variablecostingincomestatement:

Sales.................................$6,650,000
Costofgoodssold:
Beginninginventory...................$0
Costofgoodsmanufactured
(20,000@$255)....................5,100,000
Costofgoodsavailable...............5,100,000
Lessendinginventory
(1,000units@$255)...............255,000
Variablecostofgoodssold...........4,845,000
Variablesellingandadministrative
expenses:(19,000x$10)............190,0005,035,000
Contributionmargin...................1,615,000
Lessfixedexpenses:
Manufacturingoverhead................$250,000
Sellingandadministrative............225,000475,000
Netincome............................$1,140,000

d.
Netincomeundervariablecosting.....$1,140,000
Addfixedmanufacturingoverheadcosts
deferredininventoryunderabsorption
costing(5,000unitsX$12).........12,500
Netincomeunderabsorptioncosting...$1,152,500

251ManagerialAccounting,9/e
115. OperatingdataforFowlerCompanyanditsabsorptioncostingincome
Medium statementsforthelasttwoyearsarepresentedbelow:

Year1Year2
Unitsinbeginninginventory...03,000
Unitsproduced.................18,00018,000
Unitssold.....................15,00020,000

Year1Year2
Sales............................$240,000$320,000
Costofgoodssold:
Beginninginventory............030,000
Addcostofgoodsmanufactured.180,000180,000
Goodsavailableforsale.......180,000210,000
Lessendinginventory..........30,00010,000
Costofgoodssold...........150,000200,000
Grossmargin.....................90,000120,000
Selling&admin.expenses........80,00090,000
Netincome.......................$10,000$30,000

Variablemanufacturingcostsare$6perunit.Fixedmanufacturing
overheadtotals$72,000ineachyear.Thisoverheadisappliedatthe
rateof$4perunit.Variablesellingandadministrativeexpenseswere
$2perunitsold.

Required:

a.Whatwastheunitproductcostineachyearundervariable
costing?
b.Preparenewincomestatementsforeachyearusingvariable
costing.
c.Reconciletheabsorptioncostingandvariablecostingnet
incomeforeachyear.

Answer:

a.Themanufacturingcostof$6perunitistheunitproduct cost
undervariablecostinginbothyears.

b.Year1Year2
Sales...................................$240,000$320,000
Lessvariableexpenses:
Variablecostofgoodssold:
Beginninginventory.................018,000
Addvariablemanufacturingcosts@$6108,000108,000
Goodsavailableforsale............108,000126,000
Lessendinginventory@$6..........18,0006,000
Variablecostofgoodssold.........90,000120,000
Variablesellingandadministrative@$230,00040,000
Totalvariableexpenses...............120,000160,000
Contributionmargin.....................120,000160,000
Lessfixedexpenses:
Fixedmanufacturingoverhead..........72,00072,000
Fixedsellingandadministrative*.....50,00050,000
Total................................122,000122,000
Netincome..............................$(2,000)$38,000

Year1:$80,000$2x15,000=$50,000

252ManagerialAccounting,9/e
 c.Year1Year2
Variablecostingnetincome.............$(2,000)$38,000
Addfixedfactoryoverheaddeferred
ininventoryunderabsorption
costing(3,000unitsx$4perunit)...12,000
Lessfixedfactoryoverheadreleased
frominventoryunderabsorption
costing(2,000unitsx$4perunit)...(8,000)
Absorptioncostingnetincome...........$10,000$30,000

116. PabbattiCompany,whichhasonlyoneproduct,hasprovidedthefollowing
Hard dataconcerningitsmostrecentmonthofoperations:

Sellingprice............................$112

Unitsinbeginninginventory.............500
Unitsproduced...........................2,800
Unitssold...............................2,900
Unitsinendinginventory................400

Variablecostsperunit:
Directmaterials.......................$37
Directlabor...........................19
Variablemanufacturingoverhead........7
Variablesellingandadministrative....5

Fixedcosts:
Fixedmanufacturingoverhead...........$109,200
Fixedsellingandadministrative.......5,800

Thecompanyproducesthesamenumberofunitseverymonth,although
thesalesinunitsvaryfrommonthtomonth.Thecompany'svariable
costsperunitandtotalfixedcostshavebeenconstantfrommonthto
month.

Required:

a.Whatistheunitproductcostforthemonthundervariable
costing?
b.Prepareanincomestatementforthemonthusingthe contribution
formatandthevariablecostingmethod.
c.Withoutpreparinganincomestatement,determinethe absorption
costingnetincomeforthemonth.
(Hint:Usethereconciliationmethod.)

Answer:

a.Variablecostingunitproductcost
Directmaterials......................$37
Directlabor..........................19
Variablemanufacturingoverhead.......7
Unitproductcost.....................$63

253ManagerialAccounting,9/e
 b.Variablecostingincomestatement
Sales...................................$324,800
Lessvariableexpenses:
Variablecostofgoodssold:
Beginninginventory.................$31,500
Addvariablemanufacturingcosts....176,400
Goodsavailableforsale............207,900
Lessendinginventory...............25,200
Variablecostofgoodssold.........182,700
Variablesellingandadministrative.14,500197,200
Contributionmargin.....................127,600
Lessfixedexpenses:
Fixedmanufacturingoverhead........109,200
Fixedsellingandadministrative....5,800115,000
Netincome..............................$12,600

c.Computationofabsorptioncostingnetincome

Fixedmanufacturingoverheadperunit....$39.00
Changeininventories(units)............(100)

Variablecostingnetincome..............$12,600
Addfixedmanufacturingoverheadcosts
deferredininventoryunderabsorption
costing................................0
Deductfixedmanufacturingoverheadcosts
releasedfrominventoryunderabsorption
costing................................(3,900)
Absorptioncostingnetincome............$8,700

117. QabarCompany,whichhasonlyoneproduct,hasprovidedthefollowing
Medium dataconcerningitsmostrecentmonthofoperations:

Sellingprice............................$110

Unitsinbeginninginventory.............0
Unitsproduced...........................4,600
Unitssold...............................4,200
Unitsinendinginventory................400

Variablecostsperunit:
Directmaterials.......................$46
Directlabor...........................28
Variablemanufacturingoverhead........5
Variablesellingandadministrative....10

Fixedcosts:
Fixedmanufacturingoverhead...........$55,200
Fixedsellingandadministrative.......25,200

254ManagerialAccounting,9/e
 Required:

a.Whatistheunitproductcostforthemonthunder
variablecosting?
b.Prepareanincomestatementforthemonthusingthe contribution
formatandthevariablecostingmethod.
c.Withoutpreparinganincomestatement,determinethe absorption
costingnetincomeforthemonth.
(Hint:Usethereconciliationmethod.)

Answer:
a.Variablecostingunitproductcost
Directmaterials.......................$46
Directlabor...........................28
Variablemanufacturingoverhead........5
Unitproductcost......................$79

b.Variablecostingincomestatement
Sales....................................$462,000
Lessvariableexpenses:
Variablecostofgoodssold:
Beginninginventory..................$0
Addvariablemanufacturingcosts.....363,400
Goodsavailableforsale.............363,400
Lessendinginventory................31,600
Variablecostofgoodssold..........331,800
Variablesellingandadministrative..42,000373,800
Contributionmargin......................88,200
Lessfixedexpenses:
Fixedmanufacturingoverhead...........55,200
Fixedsellingandadministrative.......25,20080,400
Netincome...............................$7,800

c.Computationofabsorptioncostingnetincome

Fixedmanufacturingoverheadperunit....$12.00
Changeininventories(units)............400

Variablecostingnetincome..............$7,800
Addfixedmanufacturingoverheadcosts
deferredininventoryunderabsorption
costing................................4,800
Deductfixedmanufacturingoverheadcosts
releasedfrominventoryunderabsorption
costing................................0

Absorptioncostingnetincome............$12,600

118. UHFAntennas,Inc.,producesandsellsauniquetelevisionantenna.The
Medium companyhasjustopenedanewplanttomanufacturetheantenna,andthe
followingcostandrevenuedatahavebeenreportedforthefirstmonth
ofthenewplant'soperation:

255ManagerialAccounting,9/e
 Beginninginventory....................0
Unitsproduced.........................35,000
Unitssold.............................30,000
Sellingpriceperunit.................$50
Sellingandadministrativeexpenses:
Variableperunit...................$2
Fixed(total).......................$360,000
Manufacturingcosts:
Directmaterialcostperunit.......$9
Directlaborcostperunit..........$8
Variableoverheadcostperunit.....$3
Fixedoverheadcost(total).........$350,000

Managementisanxioustoseehowprofitablethenewantennawillbeand
hasaskedthatanincomestatementbepreparedforthemonth.Assume
thatdirectlaborisavariablecost.

Required:

a.Assumingthatthecompanyusesabsorptioncosting,compute the
unitproductcostandprepareanincomestatement.
b.Assumingthatthecompanyusesvariablecosting,computethe unit
productcostandprepareanincomestatement.
c.Explainthereasonforanydifferenceintheending inventories
underthetwocostingmethodsandtheimpactof thisdifferenceon
reportednetincome.

Answer:

a.
Unitproductcostunderabsorptioncosting:
Directmaterialscostperunit...............$9
Directlaborcostperunit...................$8
Variableoverheadcostperunit..............$3
Fixedoverheadcostperunit:
$350,000/35,000units......................$10
Totalcostperunitunderabsorptioncosting.$30

Incomestatementunderabsorptioncosting:

Sales($50x30,000)...................$1,500,000
Costofgoodssold:
Beginninginventory....................$0
Costofgoodsmanufactured.............1,050,000
Costofgoodsavailable................1,050,000
Endinginventory(5,000x$30).........150,000900,000
Grossmargin...........................600,000
Sellingandadministrativeexpense:
[360,000+($2x30,000).............420,000
Netincome.............................$180,000

Costofgoodsmanufactured:$30x35,000=$1,050,000.

256ManagerialAccounting,9/e
 b.
Unitproductcostundervariablecosting:
Directmaterialscostperunit...............$9
Directlaborcostperunit...................$8
Variableoverheadcostperunit..............$3
Totalcostperunitundervariablecosting...$20

Incomestatementundervariablecosting:

Sales($50x30,000)....................$1,500,000
Costofgoodssold:
Beginninginventory.....................$0
Costofgoodsmanufactured
($20x35,000units).................700,000
Costofgoodsavailable.................700,000
Endinginventory(5,000x$20)..........100,000
Variablecostofgoodssold.............600,000
Variablesellingandadministrative
expenses:($2x30,000)...............60,000660,000
Contributionmargin.....................840,000
Fixedexpenses:
Fixedoverhead........................$350,000
Fixedsellingandadministrative......360,000710,000
Netincome..............................$130,000

c.
Netincomeundervariablecosting.......$130,000
Addfixedmanufacturingoverheadcosts
deferredininventoryunderabsorption
costing(5,000unitsX$10)...........50,000
Netincomeunderabsorptioncosting.....$180,000

119. DataconcerningSondereggerCompanysoperationslastyearappearbelow:
Medium
Unitsinbeginninginventory............0
Unitsproduced..........................70,000
Unitssold..............................60,000

Sellingpriceperunit..................$12.00

Variablecostsperunit:
Directmaterials......................$2.00
Directlabor..........................1.00
Variablemanufacturingoverhead.......1.00
Variablesellingandadministrative...1.50
Fixedcostsintotal:
Fixedmanufacturingoverhead..........$140,000
Fixedsellingandadministrative......150,000

Required:
a.Prepareanincomestatementfortheyearusingabsorption
costing.
b.Prepareanincomestatementfortheyearusingvariable costing.
c.Prepareareportreconcilingthedifferenceinnetincome
betweenabsorptionandvariablecostingfortheyear.

257ManagerialAccounting,9/e
 Answer:
a.
Sales....................................$720,000
Costofgoodssold:
Beginninginventory....................$0
Addcostofgoodsmanufactured@$6*...420,000
Goodsavailableforsale...............420,000
Lessendinginventory@$6*............60,000360,000
Grossmargin.............................360,000
Sellingandadministrativeexpenses*.....240,000
Netincome...............................$120,000

*$6=$2.00+$1.00+$1.00+$140,000/70,000
**60,000unitsx$1.50perunitvariableplus
$150,000fixed.

b.
Sales.....................................$720,000
Lessvariableexpenses:
Variablecostofgoodssold:
Beginninginventory...................0
Addvariablemanuf.costs@$4........280,000
Goodsavailableforsale..............280,000
Lessendinginventory@$4............40,000
Variablecostofgoodssold...........240,000
Variableselling&admin.@$1.50.......90,000330,000
Contributionmargin.......................390,000
Lessfixedexpenses:
Fixedmanufacturingoverhead............140,000
Fixedselling&admin...................150,000290,000
Netincome................................$100,000

c.
Variablecostingnetincome...............$100,000
Addfixedfactoryoverheaddeferredin
inventoryunderabsorptioncosting
(10,000unitsx$2perunit)............20,000
Absorptioncostingnetincome.............$120,000

120. NelsonCompany,whichhasonlyoneproduct,hasprovidedthefollowing
Hard dataconcerningitsmostrecentmonthofoperations:

Sellingprice............................$84

Unitsinbeginninginventory.............500
Unitsproduced...........................1,900
Unitssold...............................2,100
Unitsinendinginventory................300

Variablecostsperunit:
Directmaterials.......................$25
Directlabor...........................10
Variablemanufacturingoverhead........7
Variablesellingandadministrative....10

258ManagerialAccounting,9/e
 Fixedcosts:
Fixedmanufacturingoverhead...........$38,000
Fixedsellingandadministrative.......21,000

Thecompanyproducesthesamenumberofunitseverymonth,although
thesalesinunitsvaryfrommonthtomonth.Thecompany'svariable
costsperunitandtotalfixedcostshavebeenconstantfrommonthto
month.

Required:

a.Prepareanincomestatementforthemonthusingthe contribution
formatandthevariablecostingmethod.
b.Prepareanincomestatementforthemonthusingthe absorption
costingmethod.

Answer:
a.Variablecostingincomestatement
Sales...................................$176,400
Lessvariableexpenses:
Variablecostofgoodssold:
Beginninginventory.................$21,000
Addvariablemanufacturingcosts....79,800
Goodsavailableforsale............100,800
Lessendinginventory...............12,600
Variablecostofgoodssold.........88,200
Variablesellingandadministrative.21,000109,200
Contributionmargin.....................67,200
Lessfixedexpenses:
Fixedmanufacturingoverhead..........38,000
Fixedsellingandadministrative......21,00059,000
Netincome..............................$8,200

b.Absorptioncostingincomestatement
Sales...................................$176,400
Costofgoodssold:
Beginninginventory...................$31,000
Addcostofgoodsmanufactured........117,800
Goodsavailableforsale..............148,800
Lessendinginventory.................18,600130,200
Grossmargin............................46,200
Lesssellingandadministrativeexpenses:
Variablesellingandadministrative...21,000
Fixedsellingandadministrative......21,00042,000
Netincome..............................$4,200

121. OakesCompany,whichhasonlyoneproduct,hasprovidedthefollowing
Medium dataconcerningitsmostrecentmonthofoperations:

Sellingprice............................$108

Unitsinbeginninginventory.............0
Unitsproduced...........................1,100
Unitssold...............................900
Unitsinendinginventory................200

259ManagerialAccounting,9/e
 Variablecostsperunit:
Directmaterials.......................$28
Directlabor...........................30
Variablemanufacturingoverhead........7
Variablesellingandadministrative....11

Fixedcosts:
Fixedmanufacturingoverhead...........$14,300
Fixedsellingandadministrative.......1,800

Required:

a.Prepareanincomestatementforthemonthusingthe contribution
formatandthevariablecostingmethod.
b.Prepareanincomestatementforthemonthusingthe absorption
costingmethod.

Answer:
a.Variablecostingincomestatement
Sales....................................$97,200
Lessvariableexpenses:
Variablecostofgoodssold:
Beginninginventory..................$0
Addvariablemanufacturingcosts.....71,500
Goodsavailableforsale.............71,500
Lessendinginventory................13,000
Variablecostofgoodssold..........58,500
Variablesellingandadministrative..9,90068,400
Contributionmargin......................28,800
Lessfixedexpenses:
Fixedmanufacturingoverhead...........14,300
Fixedsellingandadministrative.......1,80016,100
Netincome...............................$12,700

b.Absorptioncostingincomestatement
Sales....................................$97,200
Costofgoodssold:
Beginninginventory....................$0
Addcostofgoodsmanufactured.........85,800
Goodsavailableforsale...............85,800
Lessendinginventory..................15,60070,200
Grossmargin.............................27,000
Lesssellingandadministrativeexpenses:
Variablesellingandadministrative....9,900
Fixedsellingandadministrative.......1,80011,700
Netincome...............................$15,300

260ManagerialAccounting,9/e
122. TheMillerCompanyhadthefollowingresultsforitsfirsttwoyearsof
Medium operation:

Year1Year2
Sales................................$1,200,000$1,200,000
Costofgoodssold...................800,000680,000
Grossmargin.........................400,000520,000
Sellingandadministrativeexpense...300,000300,000
Netincome...........................$100,000$220,000

InYear1,thecompanyproducedandsold40,000unitsofitsonly
product;inYear2,thecompanyagainsold40,000units,butincreased
productionto50,000units.Thecompanysvariableproductioncostis
$5perunitanditsfixedmanufacturingoverheadcostis$600,000a
year.Fixedmanufacturingoverheadcostsareappliedtotheproducton
thebasisofeachyear'sunitproduction(i.e.,anewfixedoverhead
rateiscomputedeachyear).Variablesellingandadministrative
expensesare$2perunitsold.

Required:

a.Computetheunitproductcostforeachyearunderabsorption
costingandundervariablecosting.
b.Prepareanincomestatementforeachyear,usingthe contribution
approachwithvariablecosting.
c.Reconcilethevariablecostingandabsorptioncostingincome
figuresforeachyear.
d.ExplainwhythenetincomeforYear2underabsorption costing
washigherthanthenetincomeforYear1,although thesamenumber
ofunitsweresoldineachyear.

Answer:

a.Costperunitunderabsorptioncosting:
Year1Year2
Variableproductioncostperunit.....$5$5
Fixedmanufacturingoverheadcost:
($600,000/40,000)................$15
($600,000/50,000)................___$12
Unitproductcost.....................$20$17

Costperunitundervariablecosting:
Year1Year2
Variableproductioncostperunit......$5$5

b.Incomestatementsforeachyearundervariablecosting:

Year1Year2
Sales.................................$1,200,000$1,200,000
Costofgoodssold($5x40,000)......200,000200,000
Variablesellingandadministrative
expense($2x40,000)...............80,00080,000
Contributionmargin...................920,000920,000
Fixedexpenses:
Fixedmanufacturingoverhead........600,000600,000
Fixedsellingandadministrative
expense.........................220,000220,000
Netincome............................$100,000$100,000

261ManagerialAccounting,9/e
 c.Reconciliationofabsorptioncostingandvariablecostingnet
incomes:

Year1Year2
Netincomeundervariablecosting.......$100,000$100,000
Fixedmanufacturingoverheaddeferredin
(releasedfrom)inventory:
Year1.............................0
Year2(10,000unitsx$12perunit)________120,000
Netincomeunderabsorptioncosting.....$100,000$220,000

d.TheincreaseinproductioninYear2,inthefaceoflevel
sales,causedabuildupofinventoryandadeferralofa
portionoftheoverheadcostsofYear2tothenextyear. This
deferralofcostrelievedYear2of$120,000offixed
manufacturingoverhead.IncomeforYear2was$120,000higher than
incomeofYear1,eventhoughthesamenumberofunits wassold
eachyear.Byincreasingproductionandbuildingup inventory,the
companywasabletoincreaseprofitswithout increasingsales.Thisis
majorcriticismoftheabsorption costingapproach.

123. TheHadfieldCompanymanufacturesandsellsauniqueelectronicpart.
Hard Thecompany'splantishighlyautomatedwithlowvariableandhighfixed
manufacturingcosts.Operatingresultsonanabsorptioncostingbasis
forthefirstthreeyearsofactivitywereasfollows:

Year1Year2Year3
Sales........................$704,000$528,000$704,000
Costofgoodssold:
Beginninginventory..........00220,000
Costofgoodsmanufactured...520,000550,000496,000
Goodsavailableforsale.....520,000550,000716,000
Lessendinginventory........0220,000186,000
Costofgoodssold...........520,000330,000530,000
Grossmargin.................184,000198,000174,000
Lesssellingand
administrativeexpense.....180,000160,000180,000
Netincome(loss)............$4,000$38,000$(6,000)

262ManagerialAccounting,9/e
 Additionalinformationaboutthecompanyisasfollows:

- Variablemanufacturingcosts(directlabor,directmaterials,and
variablemanufacturingoverhead)total$3perunit,andfixed
manufacturingoverheadcoststotal$400,000.
- Fixedmanufacturingcostsareappliedtounitsofproductonthe
basisofthenumberofunitsproducedeachyear(i.e.,anewfixed
overheadrateiscomputedeachyear).
- ThecompanyusesaFIFOinventoryflowassumption.
- Variablesellingandadministrativeexpensesare$2perunitsold.
Fixedsellingandadministrativeexpensestotal$100,000.
- Productionandsalesinformationforthethreeyearsisasfollows:

Year1Year2Year3
Productioninunits....40,00050,00032,000
Salesinunits.........40,00030,00040,000

Required:

a.Computenetincomeforeachyearunderthevariablecosting
approach.
b.Referringtotheabsorptioncostingincomestatementsabove,
explainwhynetincomewashigherinYear2thaninYear1 under
absorptioncosting,inlightofthefactthatfewer unitsweresoldin
Year2thaninYear1.
c.Referringagaintotheabsorptioncostingincomestatements,
explainwhythecompanysufferedalossinYear3but reporteda
profitinYear1,althoughthesamenumberof unitswassoldineach
year.
d.IfthecompanyhadusedJITduringYear2andYear3and
producedonlywhatcouldbesold,whatwouldthecompany's net
income(loss)havebeeneachyearunderabsorption costing.

Answer:

a.
Year1Year2Year3
Sales..........................$704,000$528,000$704,000
Lessvariableexpenses:
Variablecostofgoodssold:
Beginninginventory..........0060,000
Variablemanufacturingcosts.120,000150,00096,000
Goodsavailableforsale.....120,000150,000156,000
Lessendinginventory........060,00036,000
Variablecostofgoodssold..120,00090,000120,000
Variablesellingexpense......80,00060,00080,000
Totalvariableexpenses.....200,000150,000200,000
Contributionmargin............504,000378,000504,000
Lessfixedexpenses:
Fixedmanufacturingoverhead..400,000400,000400,000
Fixedselllingandadmin......100,000100,000100,000
Totalfixedexpenses........500,000500,000500,000
Netincome(loss)..............$4,000$(122,000)$4,000

b.ProductionincreasedsharplyinYear2eventhoughunitsales
declined.Theincreaseinproductionresultedinalowerunit
productcostinYear2thaninYear1.Furthermore,because
productionexceededsales,fixedmanufacturingoverheadcosts were
deferredininventories.Theseeffectsmorethanoffset thelossof

263ManagerialAccounting,9/e
 revenueduetolowersales.Thecompany'sincome thusroseeven
thoughsalesweredown.

c.ProductiondecreasedsharplyinYear3.Thisresultedinan
increaseintheunitproductcost.Inaddition,inventories
decreasedandasaresultfixedmanufacturingoverhead deferredin
inventoriesinYear2werereleasedtotheincome statementinYear
3.

d.IfJIThadbeeninuse,thenetincomeunderabsorption costing
wouldhavebeenthesameasundervariablecostingin allthree
years.Withproductiongearedtosales,therewould havebeennoending
inventory,andtherefore,therewould havebeennofixedoverhead
costsdeferredininventoryto otheryears.

264ManagerialAccounting,9/e