SimBis Enterprises Incurred the Following Costs to Produce and Sell

question 63

Essay

SimBis Enterprises incurred the following costs to produce and sell its inventory in 2016:

SimBis also noted that the following errors were made in recording transactions in 2016 (note that these errors only affect part (d)of this question):

Required:
a)Determine the cost of inventory under the absorption costing method.
b)Determine the cost of inventory under the variable costing method.
c)Explain how management could potentially manipulate net income by using absorption costing.What can an analyst or investor do to check if income has been manipulated through the use of absorption costing?
d)Assume that,before any corrections,gross margin was $500,000 and ending retained earnings was $750,000.Determine the impact of any inventory errors on cost of goods sold and ending retained earnings for 2016.

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Definitions:

Identification

A psychological process whereby an individual associates themselves closely with another person, adopting their characteristics or viewpoints.

Interview

An interview is a formal conversation where questions are asked and answers are given, typically used for the purposes of assessment, research, or information gathering.

Secondary Gain

The advantage or benefit a person unconsciously gains from maintaining a psychosomatic illness or undesirable behavior.

Delayed Gratification

The ability to resist the temptation for an immediate reward and wait for a later reward, often perceived as more beneficial.