Question: Altoona Valve Company s planned production for the year just ended

Altoona Valve Company’s planned production for the year just ended was 20,000 units. This production level was achieved, and 21,000 units were sold. Other data follow:
Direct material used..................................................... $ 300,000
Direct labor incurred....................................................... 150,000
Fixed manufacturing overhead....................................... 210,000
Variable manufacturing overhead................................... 100,000
Fixed selling and administrative expenses...................... 175,000
Variable selling and administrative expenses................. 52,500
Finished- goods inventory, January 1............................. 2,000 units
The cost per unit remained the same in the current year as in the previous year. There were no work- in-process inventories at the beginning or end of the year.

Required:
1. What would be Altoona Valve Company’s finished- goods inventory cost on December 31 under the variable-costing method?
2. Which costing method, absorption or variable costing, would show a higher operating income for the year? By what amount?
(CMA, adapted)


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  • CreatedApril 22, 2014
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