Summit Manufacturing, Inc. produces snow shovels

Summit Manufacturing, Inc. produces snow shovels. The selling price per snow shovel is $30.

Costs involved in production are:
Direct material $5
Direct labor 4
Variable manufacturing overhead 3
Total variable manufacturing costs per unit $12
Fixed manufacturing overhead per year $180,000

In addition, the company has fixed selling and administrative costs of $160,000 per year.

EXERCISE 5-11. [LO 1] During the year, Summit produces 40,000 snow shovels and sells 37,000 snow shovels.
Required
What is the value of ending inventory using full costing?

EXERCISE 5-12. [LO 1, 2] During the year, Summit produces 40,000 snow shovels and sells 37,000 snow shovels.
Required
What is the value of ending inventory using variable costing?

EXERCISE 5-13. [LO 1, 2, 3] During the year, Summit produces 40,000 snow shovels and sells 37,000 snow shovels.
Required
Calculate the difference in full costing net income and variable costing net income without preparing either income statement.

EXERCISE 5-14. [LO 1] During the year, Summit produces 40,000 snow shovels and sells 37,000 snow shovels.
Required
What is cost of goods sold using full costing?

EXERCISE 5-15. [LO 1, 2] During the year, Summit produces 40,000 snow shovels and sells 37,000 snow shovels.
Required
What is variable cost of goods sold?

EXERCISE 5-16. [LO 1] During the year, Summit produces 40,000 snow shovels and sells 37,000 snow shovels.
Required
What is net income using full costing?

EXERCISE 5-17. [LO 1, 2] During the year, Summit produces 40,000 snow shovels and sells 37,000 snow shovels.
Required
What is net income using variable costing?

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Ashley runs a small business in Boulder, Colorado, that makes snow skis

Ashley runs a small business in Boulder, Colorado, that makes snow skis. She expects the business to grow substantially over the next three years. Because she is concerned about their product liability and is planning to take the company public in 2014, she is currently considering incorporating the business. Financial data are as follows.

2013 2014 2015
Sales Revenue 150,000 320,000 600,000
Tax-Free Interest Income 5000 8000 15,000
Deductible cash expenses 30,000 58,000 95,000
Tax depreciation 25,000 20,000 40,000

a) Compute the present value of the future cash flows for 2013-2015 assuming that Ashley incorporates the business and pays all after-tax income as dividends (for Ashleys dividends that qualify for the 15% rate)

b) Compute the present value of the future cash flows for 2013 to 2015 assuming that Ashley continues to operate the business as a sole proprietorship

c) Should Ashley incorporate the business this year?

Click here for the solution: Ashley runs a small business in Boulder, Colorado, that makes snow skis