Hardwood Inc. produces mostly wooden crates used for shipping products by ocean freighter. In 2022, Hardwood incurred the following costs:

Assume Hardwood used an average of 500 kilowatt hours of utilities per month over the past year. 

Instructions 

a. Calculate Hardwood’s total manufacturing cost if it uses a variable-costing approach. 

b. Calculate Hardwood’s total manufacturing cost if it uses an absorption-costing approach. 

c. Determine the reason for the difference between manufacturing costs under these two costing approaches.

Transcribed Image Text:

Wood used Nails (considered insignificant and a variable expense) Direct labour Utilities for the factory: $1,500 each month, plus $0.50 for each kilowatt hour used each month Rent expense for the factory for year $54,000 350 43,000 21,400