{"id":77390,"date":"2018-02-20T23:50:30","date_gmt":"2018-02-20T23:50:30","guid":{"rendered":"https:\/\/writemyessayfree.com\/this-is-illogical-said-mike-rafferty-president-of-xyz-company-3"},"modified":"2017-08-18T07:13:59","modified_gmt":"2017-08-18T07:13:59","slug":"this-is-illogical-said-mike-rafferty-president-of-xyz-company-3","status":"publish","type":"post","link":"https:\/\/www.benedictsol.com\/blogs\/this-is-illogical-said-mike-rafferty-president-of-xyz-company-3\/","title":{"rendered":"This is illogical,\u201d said Mike Rafferty, president of XYZ Company."},"content":{"rendered":"<p><a class=\"illogical-said-mike-rafferty-president-xyz-company\/\"><\/a> <\/p>\n<p>\u201cThis is illogical,\u201d said Mike Rafferty, president of XYZ Company. \u201cUnit sales this year were the same as last year, but our bottom line profits have more than doubled. Who made the accounting mistake?\u201dthe people or the computer?\u201d<\/p>\n<p>The income statements to which Mr. Rafferty was referring are shown below (based on the absorption costing method):<\/p>\n<p>XYZ Company Income Statement \u2013 Absorption Method<br \/> Year 1 Year 2<br \/> Sales (40,000 units each year) $1,253,000 $1,253,000<br \/> Cost of goods sold 840,000 720,000<br \/> Gross margin 413,000 533,000<br \/> Selling and administrative expense 335,000 335,000<br \/> Net operating income $78,000 $198,000<\/p>\n<p>XYZ Production Data<br \/> Year 1 Year 2<br \/> Production in units 40,000 50,000<br \/> Sales in units 40,000 40,000<br \/> Variable manufacturing cost per unit produced $6 $6<br \/> Variable selling and administrative expense per unit sold $1 $1<br \/> Fixed manufacturing overhead costs (total) $600,000 $600,000<\/p>\n<p>The income statements above report net operating income for the first two years of operation. During the first year, the company produced and sold 40,000 units. During the second year, the company also sold 40,000 units, but it increased production as shown below:<\/p>\n<p>XYZ Company applies fixed manufacturing overhead costs to its product on the basis of each year\u2019s production and so a new fixed manufacturing overhead rate is computed each year.<\/p>\n<p>Explain how activity-based costing may or may not be useful for XYZ in preparing variable and absorption-based income statements.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>\u201cThis is illogical,\u201d said Mike Rafferty, president of XYZ Company. \u201cUnit sales this year were the same as last year, but our bottom line profits have more than doubled. Who made the accounting mistake?\u201dthe people or the computer?\u201d The income <a href=\"https:\/\/www.benedictsol.com\/blogs\/this-is-illogical-said-mike-rafferty-president-of-xyz-company-3\/\" class=\"read-more\">Read More &#8230;<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-77390","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/77390","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/comments?post=77390"}],"version-history":[{"count":0,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/77390\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/media?parent=77390"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/categories?post=77390"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/tags?post=77390"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}