Stonehenge Inc APrepare Stonehenge's December 31 Income Statement for the Current Year

question 167

Essay

Stonehenge Inc.,a manufacturer of landscaping blocks,began operations on April 1 of the current year.During this time,the company produced 750,000 units and sold 720,000 units at a sales price of $9 per unit.Cost information for this period is shown in the following table:
$\begin{array}{ll}\text { Production costs }\\\text { Direct materials } & \$ 1.80 \text { per unit } \\\text { Direct labor } & \$ .30 \text { per unit } \\\text { Variable overhead } & \$ 495,000 \text { in tota } \\\text { Fixed overhead } & \$ 450,000 \text { in total }\\\text { Nonproduction costs }\\ \text {Variable selling and administrative } &\$18,000 \text { in total} \\ \text { Fixed selling and administrative } & \text { \$53,000 in total} \\\end{array}$

a.Prepare Stonehenge's December 31 income statement for the current year under absorption costing.
b.Prepare Stonehenge's December 31 income statement for the current year under variable costing.

Appreciate the different approaches to capital budgeting preferred by firms of varied sizes.

Understand the concept and importance of capital rationing in project selection.

Calculate and interpret NPV (Net Present Value) for varying projects.

Calculate and interpret IRR (Internal Rate of Return) for different investments.

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