Tui Acc 403 Mod 4

Module 4: Session Long Project

Trident University

Figure 2: Lewis Company Absorption Income statement

Figure 2: Lewis Company Absorption Income statement

Figure 1: Lewis Company information

Figure 1: Lewis Company information

In module 4 we are taking a closer look at managerial accounting. In managerial accounting the focus is more on more detailed and internal reports of the company’s products, activities, and departments in order increase planning, directing, controlling, and overall decision making. In the module 4 SLP, we are asked to examine the product and cost information of Lewis Company in figure 1. Then we are asked to look at the absorption income statement of Lewis Company in figure 2. Then we are asked to create a contribution margin income statement for Lewis Company based on the information that was given in figure 1. The contribution margin income statement is different than an absorption income statement in two obvious ways. The contribution margin income statement does not include allocate fixed overhead at a production rate but it allocates all fixed overhead and subtracts it from the contribution margin. The second noticeable difference is the way that the allocation of fixed overhead rate in the absorption income statement and the allocation of the total fixed overhead in the contribution margin income statement cause the net incomes to be drastically different. Examine figure 3 for example. After we use the information from figure 1 to create a contribution margin income statement we are asked to compare net operating profit from a contribution margin income statement with net income from an absorption Figure 3: Lewis Company contribution margin income statement

Figure 3: Lewis Company contribution margin income statement

income statement, and explain why this difference happens. In the absorption statement net income was Figure 4: Lewis Company Absorption income statement adjusted to $330 sales per unit

Figure 4: Lewis Company...