Pandora Pillow Company's planned production for the year just ended was 10,000 units. This production level was
Question:
Pandora Pillow Company's planned production for the year just ended was 10,000 units. This production level was achieved, but only 9,000 units were sold. Other data follow:
Direct material used.......................................................................... $40,000
Direct labor incurred ......................................................................... 20,000
Fixed manufacturing overhead .......................................................... 25,000
Variable manufacturing overhead ...................................................... 12,000
Fixed selling and administrative expenses ........................................ 30,000
Variable selling and administrative expenses .................................... 4,500
Finished-goods inventory, January 1................................................. None
There were no work-in-process inventories at the beginning or end of the year.
Required:
1. What would be Pandora Pillow 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?
3. Suppose Pandora Pillow Company uses throughput costing, and direct material is its only unit level cost. What would be Pandora's finished-goods inventory on December 31?
Step by Step Answer:
Managerial Accounting Creating Value in a Dynamic Business Environment
ISBN: 978-0078110917
9th edition
Authors: Ronald W. Hilton