San Diego State University Operations And Supply Chain Management Assignment Help - Materials

Question - 9-22 Absorption versus variable costing. Grunewald Company manufacturers a professional grade
vacuum cleaner and began operations in 2011. For 2011, Grunewald budgeted to produce and sell
20,000 units. The company had no price, spending, or efficiency variances, and writes off production-
volume variance to cost of goods sold. Actual data for 2011 are given as follows:

1Units produced 18,000
2 Units sold 17,500
3 Selling price $ 425

Variable costs:
Manufacturing cost per unit produced
Direct materials $ 30
Direct manufacturing labor 25
Manufacturing overhead 60
Marketing cost per unit sold 45

Fixed costs:
Manufacturing costs $1,100,000
Administrative costs 965,450
Marketing 1,366,400


1. Prepare a 2011 income statem ...Read More ent for Grunewald Company using variable costing.
2. Prepare a 2011income statement for Grunewald Company using absorption costing.
3. Explain the differences in operating incomes obtained inrequirement 1 and requirement 2.
4. Grunewald's management is considering implementing a bonus for the supervisors based on gross
margin under absorption costing. What incentives will this create for the supervisors? What modifica-
tions could Grunewald management make to improve such a plan? Explain briefly. ...Read Less

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