Pinellas Pillow Company?s planned predication for the year just ended was 10,000 units. This production level was achieved, but only 9,000 units were sold. Other data follows:

There were no work-in-process inventories at the beginning or end of the year.

Required:

1. What would be Pinellas Pillow Company's finished-goods inventory cost on December 31 under the variable-costing method?

2. Which costing method, absorption or variable costing, would show a higher operating income for the year? By what amount?

3. Suppose Pinellas Pillow Company uses throughput costing, and direct material is its only unit-level cost. What would be Pinellas' finished-goods inventory on December 31?

Transcribed Image Text:

Direct material used Direct labor incurred Fixed manufacturing overhead Variable manufacturing overhead $80,000 40,000 Finished-goods inventory, January 1 50,000 24,000 Fixed selling and administrative expenses 60,000 Variable selling and administrative expenses 9,000 None Direct material used Direct labor incurred Fixed manufacturing overhead Variable manufacturing overhead $80,000 40,000 Finished-goods inventory, January 1 50,000 24,000 Fixed selling and administrative expenses 60,000 Variable selling and administrative expenses 9,000 None

Answer rating: 100% (QA)

1 Variable costing 2 Absorption costing Predetermined ... View the full answer