Pete’s Plant Stands manufactures wooden stands used by plant nurseries. In May 2010, the company manufactured 18,000 and sold 16,560 stands. The cost per unit for the 18,000 stands produced was as follows:
Direct material ......... $ 9.00
Direct labor ......... 6.00
Variable overhead ........ 3.00
Fixed overhead ......... 4.00
Total ............. $22.00
There were no beginning inventories for May and no work in process at the end of May.
a. What is the value of ending inventory using absorption costing?
b. What is the value of ending inventory using variable costing?
c. Which accounting method, variable or absorption, would have produced the higher net income for May?