Ortiz Company produced 10,000 units during the past year but sold only 8,500 of the units. The
Question:
Direct materials used ....................................... $70,000
Direct labour incurred ....................................... 30,000
Variable manufacturing overhead .......................... 25,000
Fixed manufacturing overhead ............................. 40,000
Fixed selling and administrative expenses ................ 70,000
Variable selling and administrative expenses ............ 10,000
There was no work in process inventory at the beginning of the year. Ortiz did not have any beginning finished goods inventory either.
Instructions
(a) Calculate Ortiz Company's finished goods inventory cost on December 31 under variable costing.
(b) Determine which costing method, absorption or variable, would show a higher net income for the year. By what amount?
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Related Book For
Managerial Accounting Tools for Business Decision Making
ISBN: 978-1118033890
3rd Canadian edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso, Ibrahim M. Aly
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