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# Managerial Accounting Problem 6-17

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on 12 March 2015

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#### Transcript of Managerial Accounting Problem 6-17

Managerial Accounting
Chapter 6
3. Assume that the company uses absorption costing:
a. Compute the unit product cost for year 1, year 2, year 3

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

1. Compute the company's break-even point in units sold.
Nickelson Company manufactures and sells one product. The following information pertains to each of the company's first three years of operations:
Variable Costing and Segment Reporting: Tools for Management

4. Compare the net operating income figures that you computed in equipments 2 and 3 to the break-even point that you computed in requirement 1. Which net operating income figures seem counter intuitive? Why?
Problem 6-17 Variable and Absorption Costing Unit Product Costs and Income Statements [LO1, LO2]:
a. Compute the unit product cost for year 1, year 2, year 3
Variable Costing Income Statement:
a. Compute the unit product cost for year 1, year 2, year 3
b. Prepare an income statement for year 1, year 2, year 3.
During its 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.
By using contribution margin, the BEP in units can be computed:
2. Assume the company uses variable costing:
a. Compute the unit product cost for year 1, year 2, year 3

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

2. Assume the company uses variable costing:
2. Assume the company uses variable costing:
Manufacturing costs only are included in product cost under Variable costing:
b. Prepare an income statement for year 1, year 2, year 3.
3. Assume that the company uses absorption costing:
3. Assume that the company uses absorption costing:

Calculate Cost of Goods Sold:

* Operations Nickelson:
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