Question: Consider the following information pertaining to a year s operation of

Consider the following information pertaining to a year’s operation of Blair Company:
Units produced ............. 2,500
Units sold ................ 2,100
Direct labor ............... $4,000
Direct materials used ............ $3,000
Selling and administrative expenses (all fixed) . $ 900
Fixed manufacturing overhead ........ $5,000
Variable manufacturing overhead ...... $2,500
All beginning inventories .......... $ 0
Gross margin (gross profit) .......... $2,200
Direct-materials inventory, end ........ $ 400
Work-in-process inventory, end ...... $ 0

1. What is the ending finished-goods inventory cost under variable costing?
2. What is the ending finished-goods inventory cost under absorption costing?
3. Would operating income be higher or lower under variable costing? By how much? Why?


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  • CreatedNovember 19, 2014
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