The Following Data Are Available for Brennan Soft Toys Company

question 197

Essay

The following data are available for Brennan Soft Toys Company for the year ended September 30,2015.
$\begin{array}{lr}\text { Sales: }&24,000 \text { units at } \$ 50 \text { each }\\\text { Expected and actual production: }&30,000 \text { units }\\\text { Manufacturing costs incurred: }\\\text { Variable: } & \$ 525,000 \\\text { Fixed: } & \$ 372,000 \\\text { Nonmanufacturing costs incurred: } & \\\text { Variable: } & \$ 144,800 \\\text { Fixed: } & \$ 77,400 \\\text { Beginning inventories: } & \text { none }\end{array}$ Required:
a.Determine operating income using the variable-costing approach.
b.Determine operating income using the absorption-costing approach.
c.Explain why operating income is not the same under the two approaches.

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Definitions:

Compounded Monthly

Interest on an investment or loan calculated on a monthly basis, where the interest earned each month is added to the principal, and future interest is based on this new amount.

Corporate Bond Fund

A corporate bond fund is an investment fund that focuses on investing in the corporate debt securities of varying credit ratings and maturities.

Equal Annual Installments

A repayment structure where the borrower pays back a loan in fixed amounts each year until the full amount is repaid.

Compounded Annually

A method of calculating interest where the interest earned each year is added to the principal, so the balance doesn't merely grow, it grows at an increasing rate.