Accounting help needed

Please complete in Excel.

Problem 5-17 Variable and Absorption Costing Unit Product
Costs and Income Statement

Nickelson Company manufactures and sells one product. The
following information pertains to each of the company’s first three years of
operations.

Variable costs per unit:

During the first year of operations Nickelson produced
60,000 units and sold 60,000 units. During its second year of operations it
produced 75,000 units and sold 50,000 units. In its third year, Nickelson
produced 40,000 units and sold 65,000 units. The selling price of the company’s
product is $56 per unit.

Required:

1. 
Compute the company’s break-even point in units
sold.

2. 
Assume the company uses variable costing:

a. 
Compute the unit product cost per year 1, 2, and
3.

b. 
Prepare an income statement for year 1, 2, and
3.

3. 
Assume the company uses absorption costing:

a. 
Compute the unit product cost for year 1, 2, and
3.

b. 
Prepare an income statement for year 1, 2, and
3.

4. 
Compare the net operating income figures that
you computed in requirements 2 and 3 to the break-even point that you computed
in requirement 1. Which net operating income figures seem counterintuitive?
Why?

Problem 5-21 Prepare and Reconcile Variable Costing
Statements

Linden Company manufactures and sells a single product. Cost
data for the product follows:

Variable Cost Per Unit:

The product sells for $40 per unit. Production and sales
data for May and June, the first two months of operations, are as follows:

Income Statements prepared by the accounting department,
using absorption costing, are presented below:

Required:

1. 
Determine the unit product cost under:

a. 
Absorption costing.

b. 
Variable costing.

2. 
Prepare a contribution format variable costing
income statements for May and June.

3. 
Reconcile the variable costing and absorption
costing net operating incomes.

4. 
The company’s Accounting Department has
determined the break-even point to be 28,000 units per month, computed as
follows:

Fixed cost per month  =  $420,000  = 28,000 units

Unit contribution margin  $15 per unit

Upon receiving this figure, the president commented,
“There’s something peculiar here. The controller says that the break-even point
is 28,000 units per month. Yet we sold only 26,000 units in May, and the income
statement we received showed a $2,000 profit. Which figure do we believe.”
Prepare a brief explanation of what happened on the May income statement.

5-22 Absorption and Variable Costing; Product Constant,
Sales Fluctuate

Sandi Scott obtained a patent on a small electronic device
and organized Scott Products, Inc., to produce and sell the device. During the
first month of operations, the device was very well received on the market, so
Ms. Scott looked forward to a healthy profit. For this reason, she was
surprised to see a loss for the month on her income statement. This statement
was prepared by her accounting service, which takes great pride in providing
its clients with timely financial data. The statement follows:

Ms. Scott is discouraged over the loss shown for the month,
particularly because she had planned to use the statement to encourage
investors to purchase stock in the new company. A friend, who is a CPA, insists
that the company should be using absorption costing rather than variable
costing. He argues that if absorption costing had been used, the company would
probably have reported a profit for the month.

Selected cost data relating to the product and to the first
month of operations follow:

Required:

1. 
Complete the following:

a. 
Compute the unit product cost under absorption
costing.

b. 
Redo the company’s income statement for the
month using absorption costing.

c. 
Reconcile the variable and absorption costing
net operating income (loss) figures.

2. 
Was the CPA correct in suggesting that the
company really earned a “profit” for the month? Explain.

3. 
During the second month of operations, the
company again produced 50,000 units but sold 60,000 units. (Assume no change in
total fixed costs.)

a. 
Prepare a contribution format income statement
for the month using variable costing.

b. 
Prepare an income statement for the month using
absorption costing.

c. 
Reconcile the variable costing and absorption
costing net operating incomes.

Problem 6-16 Second Stage Allocations and Product Margins

AnimPix, Inc., is a small company that create
computer-generated animations for films and television. Much of the company’s
work consists of short commercials for television, but the company also does
realistic computer animations for special effects in movies.

The young founders of the company have become increasingly
concerned with the economics of the business- particularly because many
competitors have sprung up recently in the local area. To help understand the
company’s cost structure, an activity-based cost systems has been designed.
Three major activities are carried out in the company: animation concept,
animation production, and contract administration. The animation concept
activity is carried out at the contract proposal stage when the company bids on
projects. This is an intensive activity that involves individuals from all
parts of the company in creating storyboards and prototype stills to be shown
to the prospective client. After the client has accepted a project, animation
goes into production and contract administration begins. Technical staff do
almost all of the work involved in animation production, whereas the
administrative staff is largely responsible for contract administration. The
activity cost pools and their activity measures and rates are listed below:

These activity rates include all of the costs of the
company, except for the costs of idle capacity and organization-sustaining
costs. There are no direct labor or direct material costs.

  Preliminary
analysis using these activity rates has indicated that the local commercial
segment of the market may be unprofitable. This segment is highly competitive.
Producers of local commercials may ask several companies like AnimPix to bid,
which results in an unusually low ratio of accepted contracts to bids.
Furthermore, the animation sequences tend to be much shorter for local
commercials than for other work. Because animation work is billed at standard
rates according to the running time of the completed animation, the revenues
from these short projects tend to be below average. Data concerning activity in
the local commercials market appear below:

The total sales for local commercials amounted to $240,000.

Required:

1. 
Determine the cost of serving the local
commercial market.

2. 
Prepare a report showing the margins earned
serving the local commercial market. (Remember,

3. 
What would you recommend to management
concerning the local commercials market?

Problem 6-17 Comparing Tradition and Activity-Based Product
Margins

Precision Manufacturing Inc. (PMI) makes two types of
industrial component parts- the EX300 and the TX500. An absorption costing
income statement for the most recent period is shown below:

PMI produced and sold 60,000 units of EX300 at a price of
$20 per unit and 12,500 units of TX500 at a price $40 per unit. The company’s
traditional cost system allocates manufacturing overhead to products using
overhead rate and direct labor dollars as the allocation base. Additional
information relating to the company’s two product lines is shown below:

The company has created an activity-based costing system to
evaluate the profitability of its products. PMI’s ABC implementation team
concluded that the $50,000 and $100,000 of the company’s advertising expenses
could be directly traced to EX300 and TX500, respectively. The remainder of the
selling and administrative expenses was organization-sustaining in nature. The
ABC team also distributed the company’s manufacturing overhead to four
activities as shown below:

Required:

1. 
Using Exhibit 6-12 as a guide, compute the
product margins for the EX300 and TX500 under the company’s traditional costing
system.

2. 
Using Exhibit 6-10 as a guide, compute the
product margins for EX300 and TX500 under the activity-based costing system.

Using Exhibit 6-13 as a guide, prepare a
quantitative comparison of the traditional and activity-based cost assignments.
Explain why the traditional and activity