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09-29 Variable costing and absorption the All Fixed Company. It is the end of 2009. The all-fixed company began operations in January 2008. The company is so named because it has no variable costs. All its costs are fixed they do not vary with output.
1)Prepare income statements with on column for 2008 one column for 2009 and one column for the two years together using(a)variable costing and (b)absorption costing.
Sales
10000 tons
Production
Selling Price
$30 per ton
2) What is the break even point under (a) variable costingand (b) absorption costing?
Costs(all fixed):
Manufacturing
3) What inventory costs would be carried in the balance sheet on December 31 2008 and 2009 under each method?
Operating(non-manufacturing
4)Asssume that the performance of the top manager of the company is evaluatedand rewarded largely on the basis of reported operating income. Which costing method would the manager prefer? Why?
Beginning Inventory
Ending Inventory
The All Fixed company is located on the bank of a river and has its own hydroelectric plant to supply power light and heat. The company manufactures a synthetic fertilizer from air and river water and sells its product at a price that is not expected to change. It has a small staff of employees all paid fixed annual salaries. The output of the plant can be increaSED or decreased by adjusting few dials on a control panel. The folllowing budgeted and actual data are for the operations of the aLL-FIXED Company. All-Fixed uses budegeted production as the denomenator level and writes off any production volume varianceto cost of goods sold.
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