BUSI 101 1nd Edition Lecture 19Outline of Last Lecture I. Page 223 in Managerial Accounting Textbooka. E5-1b. E5-11c. E5-14d. E5-2AII. Chapter 6 Overviewa. Absorption Costing versus Direct CostingIII. Page 104 in CoursepackOutline of Current Lecture I. Absorption Costing versus Direct Costing ReviewII. Page 105 in CoursepackIII. Page 106 in CoursepackIV. E-63V. E6-18VI. E6-3AVII. P6-7ACurrent LectureChapter 6 ContinuedThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.Absorption Costing4 Product Costs (DM, DL, VOHD, FOHD)Followed by GAAP, Required by the IRSVs. Direct Costing3 Product Costs (DM, DL, VOHD)FOHD is a period costUse when making decisionsWhen Production=Sales, ACπ=DCπ (No change in inventory)If Production is greater than sales, ACπ is greater than DCπ (inventory increases, i.e. produced more than sold)If Production is less than sales, ACπ is less than DCπ (inventory has decreased)Page 105 in Coursepack – everything you need to know about Chapter 6 (also like question number four in take home test)Absorption Costing Direct CostingSales 800,000-CGS 480,000 DM (DM+DL=$80) DL VOHD (8)Sales 800,000-VC DM DL VOHDFOHD (32)=GM 320,000-S+A V 60,000 F 90,000=π 170,000 VS+A 60,000=CM-FC FOHD 160,000 FS+A 90,000=π 138,000DM+DL=$400,000/5,000 units=$80 per unitTOTAL OHD=200,000 (20%=V, 80%=F)$40,000/5000=$8$160,000/5000=$32Total S+A=$150,000 (60%=F, 40%=V)UnitsBI 0+Produced 5000=Available 5000-EI 1000=Sold 4000Difference in π=(Change in INV.)(FOHD per unit)(1000)($32)=$32,000Page 106 in CoursepackJan-Abs Jan-Dir. Feb-Abs Feb-Dir.Sales 693,000 Sales 693,000 Sales 924,000 Sales 924,000-CGS 369,000 DM 8 DL 9 VOHD 6 FOHD 18=GM $324,000-SG+AEx. V $63,000 F $210,000=π $51,000-VC DM 8 DL 9 VOHD 6 VSG+A 7=CM 423,000-FC FOHD 216,000 FSG+A 210,000=π (3,000)-CGS 423,000 123,000=41x3000 DM 8 DL 9 VOHD 6 FOHD 24=GM $378,000-SG+AEx. V $84,000 F $210,000=π $84,000-VC DM 8 DL 9 $276,000 VOHD 6 VSG+A 7 84,000=CM 564,000-FC FOHD 216,000 FSG+A 210,000=π $138,000Difference in π = 3000(18)=54,000E6-3, page 273Now #1 #2 #3Sales-VC=CM-FC=π310,000-210,000=100,000-75,000=25,000341,000-210,000=131,000-75,000=56,000310,000-179,800=130,000-75,000=55,200310,000-210,000=100,000-55,000=45,000310,000/5000=62% x 1.10=68.20E6-18 page 277a) 800 unitsx$14.50=$11,600DirectDM $79,000/5000=8.77778DL 30,000/5000=3.33333VOHD 21,500/9000=2.38889130,500/9000=$14.50 per unitb) if production is greater than sales, then ACπ>DCπdifference in π=800($5 per unit)=$4000P6-3A page 279ECON STD. DELUXECM per unit $16 $35 $54HRS/unit .5 .8 1.6CM/hour $32 $43.75 $33.75P6-7A2013: produced 4,000 tons, sold 2,500 tons2014: produced 2,500 tons, sold 4,000 tons2013-Abs 2013-Dir. 2014-Abs 2014-Dir.Sales 5,000,000-CGS DM DL 300Sales 5,000,000-VC DM DL $750,000Sales 8,000,000-CGS 1,240,000=800(1500) DM Sales 8,000,000-VC DM DL $1,200,000VOHD FOHD 500=GM $3,000,000-SG+AEx. V $500,000 F $500,000=π $2,000,000 VOHD VSG+A 500,000=CM 3,750,000-FC FOHD 2,000,00 FSG+A 500,000=π 1,250,000 DL 750,000 VOHD FOHD 2,000,000=GM $4,050,000-SG+AEx. V $800,000 F $500,000=π $2,750,000 VOHD VSG+A 800,000=CM 6,000,000-FC FOHD 2,000,000 FSG+A 500,000=π $3,500,0002013 difference in profit