Question: During its first year of operations Snobegon Inc located in

During its first year of operations, Snobegon, Inc. (located in Lake Snobegon, Minnesota), produced 40,000 plastic snow scoops. Snow scoops are oversized shovel-type scoops that are used to push snow away. Unit sales were 38,200 scoops. Fixed overhead was applied at $0.75 per unit produced. Fixed overhead was underapplied by $2,900. This fixed overhead variance was closed to Cost of Goods Sold. There was no variable overhead variance. The results of the year’s operations are as follows (on an absorption-costing basis):
Sales (38,200 units @ $20) ............. $764,000
Less: Cost of goods sold ............. 546,260
Gross margin ................... $217,740
Less: Selling and administrative expenses (all fixed) .... 184,500
Operating income .................. $ 33,240
Required:
1. Calculate the cost of the firm’s ending inventory under absorption costing. What is the cost of the ending inventory under variable costing?
2. Prepare a variable-costing income statement. Reconcile the difference between the two


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  • CreatedSeptember 01, 2015
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