Great Outdoze Company manufactures sleeping bags, which sell for $66.10 each. The variable costs of production are
Question:
Great Outdoze Company manufactures sleeping bags, which sell for $66.10 each. The variable costs of production are as follows:
Direct material | $ | 19.50 | ||||
Direct labor | 10.00 | |||||
Variable manufacturing overhead | 8.00 | |||||
Budgeted fixed overhead in 20x1 was $225,000 and budgeted production was 30,000 sleeping bags. The year’s actual production was 30,000 units, of which 26,500 were sold. Variable selling and administrative costs were $1.10 per unit sold; fixed selling and administrative costs were $23,000.
Required:
1. Calculate the product cost per sleeping bag under (a) absorption costing and (b) variable costing.
2-a. Prepare an operating income statement for the year using absorption costing.
2-b. Prepare an operating income statement for the year using variable costing.
3. Reconcile reported operating income under the two methods using the shortcut method.
Managerial Accounting Creating Value in a Dynamic Business Environment
ISBN: 978-1259569562
11th edition
Authors: Ronald W. Hilton