Vasquez Supply Company hired Adrianna as its accountant to replace a retiree. She comes with experience in various industries and can prepare financial statements that use standard costing within an absorption costing system. However, Vasquez would like to prepare its financial statements using variable costing for its internal reports. Adrianna has gathered the following information for the last 2 years of operation Adrianna noted there were no price or efficiency variances for either year. It's the company's policy to write off any fixed-MOH volume variances directly to COGS. Instructions
a.Determine the per-unit cost that would be capitalized under each costing system.
b.Calculate the ending FG Inventory balance under each costing system for 2026.
c.Calculate the Fixed-MOH volume variance for (1) 2025 and (2) 2026. List amount and sign.
d.Prepare an income statement for both years under absorption costing.
e.Prepare an income statement for both years under variable costing.
f. Calculate the difference in operating income (if any) between the two methods for (1) 2025 and (2) 2026. Explain any differences with calculations.
g. Which method would you recommend for internal performance evaluation purposes and why?
h. Which method would you recommend when preparing your financial statements to obtain a loan and why?

Question

Vasquez Supply Company hired Adrianna as its accountant to replace a retiree. She comes with experience in various industries and can prepare financial statements that use standard costing within an absorption costing system. However, Vasquez would like to prepare its financial statements using variable costing for its internal reports. Adrianna has gathered the following information for the last 2 years of operation  Adrianna noted there were no price or efficiency variances for either year. It's the company's policy to write off any fixed-MOH volume variances directly to COGS. Instructions 
a.Determine the per-unit cost that would be capitalized under each costing system.
b.Calculate the ending FG Inventory balance under each costing system for 2026.
c.Calculate the Fixed-MOH volume variance for (1) 2025 and (2) 2026. List amount and sign.
d.Prepare an income statement for both years under absorption costing.
e.Prepare an income statement for both years under variable costing. 
f. Calculate the difference in operating income (if any) between the two methods for (1) 2025 and (2) 2026. Explain any differences with calculations.
g. Which method would you recommend for internal performance evaluation purposes and why?
h. Which method would you recommend when preparing your financial statements to obtain a loan and why?

Quizplus · Accepted Answer

The Answer of Vasquez Supply Company hired Adrianna as its accountant to replace a retiree. She comes with experience in various industries and can prepare financial statements that use standard costing within an absorption costing system. However, Vasquez would like to prepare its financial statements using variable costing for its internal reports. Adrianna has gathered the following information for the last 2 years of operation  Adrianna noted there were no price or efficiency variances for either year. It's the company's policy to write off any fixed-MOH volume variances directly to COGS. Instructions 
a.Determine the per-unit cost that would be capitalized under each costing system.
b.Calculate the ending FG Inventory balance under each costing system for 2026.
c.Calculate the Fixed-MOH volume variance for (1) 2025 and (2) 2026. List amount and sign.
d.Prepare an income statement for both years under absorption costing.
e.Prepare an income statement for both years under variable costing. 
f. Calculate the difference in operating income (if any) between the two methods for (1) 2025 and (2) 2026. Explain any differences with calculations.
g. Which method would you recommend for internal performance evaluation purposes and why?
h. Which method would you recommend when preparing your financial statements to obtain a loan and why?

Vasquez Supply Company Hired Adrianna as Its Accountant to Replace