Question : 56) The following data available for Ruggles Company for the : 1217276

56) The following data are available for Ruggles Company for the year ended September 30, 2011.

Sales:24,000 units at $50 each

Expected and actual production:30,000 units

Manufacturing costs incurred:

Variable:$525,000

Fixed:$372,000

Nonmanufacturing costs incurred:

Variable:$144,800

Fixed:$77,400

Beginning inventories:none

Required:

a.Determine operating income using the variable-costing approach.

b.Determine operating income using the absorption-costing approach.

c.Explain why operating income is not the same under the two approaches.

57) Davey Jones and Sons Company was concerned that increased sales did not result in increased profits for 2012. Both variable unit and total fixed manufacturing costs for 2011 and 2012 remained constant at $20 and $2,000,000, respectively.

In 2011, the company produced 100,000 units and sold 80,000 units at a price of $50 per unit. There was no beginning inventory in 2011. In 2012, the company made 70,000 units and sold 90,000 units at a price of $50. Selling and administrative expenses were all fixed at $200,000 each year.

Required:

a.Prepare income statements for each year using absorption costing.

b.Prepare income statements for each year using variable costing.

c.Explain why the income was different each year using the two methods. Show computations.

58) The manager of the manufacturing division of Iowa Windows does not understand why income went down when sales went up. Some of the information he has selected for evaluation include:

JanuaryFebruary

Units produced40,00030,000

Units sold30,00040,000

Sales$600,000$800,000

Beginning inventory0150,000

Cost of production600,000550,000

Ending inventory150,0000

Operating income70,00035,000

The division operated at normal capacity during January.

Variable manufacturing cost per unit was $5, and the fixed costs were $400,000.

Selling and administrative expenses were all fixed.

Required:

Explain the profit differences. How would variable costing income statements help the manager understand the division’s operating income? 

59) Explain the difference between the gross margin format and the contribution margin format for the income statement. What information is highlighted with each?

60) Galliart Company has two identical divisions, East and West. Their sales, production volume, and fixed manufacturing costs have been the same for the last five years. The amounts for each division were as follows:

20X120X220X320X420X5

Units produced50,00055,00055,00044,00044,000

Units sold45,00045,00050,00050,00050,000

Fixed manufacturing costs              $55,000              $55,000$55,000$55,000$55,000

East Division uses absorption costing and West Division uses variable costing.

Both use FIFO inventory methods.

Variable manufacturing costs are $5 per unit.

Selling and administrative expenses were identical for each division.

There were no inventories at the beginning of 20X1.

Which division reports the highest income each year? Explain.