Hardwood Inc. produces mostly wooden crates used for shipping products by ocean freighter. In 2016, Hardwood incurred the following costs:

Assume Hardwood used an average of 500 kilowatt hours 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 plant: $1,500 each month, plus $0.50 for $54,000 350 43,000 each kilowatt hour used each month Rent expense for plant for year 21,400