Variable Costing, Absorption Costing

During its first year of operations, Snobegon, Inc. $($located in Lake Snobegon, Minnesota$),$ produced $40,500$ plastic snow scoops. Snow scoops are oversized shovel$-$type scoops that are used to push snow away. Unit sales were $38,900$ scoops. Fixed overhead was applied at $$0\mathrm{.}75$ per unit produced. Fixed overhead was underapplied by $$2,600.$ This fixed overhead variance was closed to Cost of Goods Sold. There was no variable overhead variance. The results of the year's operations are as follows $($on an absorption$-$costing basis$)$:

Sales $(38,900$ units @ $$20)$ $$778,000$

Less: Cost of goods sold $548,460$

Gross margin $$229,540$

Less: Selling and administrative expenses $($all fixed$)185,500$

Operating income $ $44,040$

Required:

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$1.$ Calculate the cost of the firm's ending inventory under absorption costing. Round unit cost to five decimal places. Round your final answer to the nearest dollar.

$fill in the blank a$0698$d$00$ff$95$fd$0\_1$

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Determine the number of units in ending inventory first. Calculate unit cost after determining unadjusted COGS $($before adjustment for underapplied fixed overhead$).$

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What is the cost of the ending inventory under variable costing? Round unit cost to five decimal places. Round your final answer to the nearest dollar.

$fill in the blank e$43$f$39$fed$061068\_1$

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Take unit cost under absorption less fixed overhead amount per unit to get variable cost per unit for variable costing.

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$2.$ Prepare a variable$-$costing income statement. Round the unit cost to five decimal places, when required. Round your final answers to the nearest dollar. Use the rounded values in subsequent computations.

Snobegon, Inc.

Variable$-$Costing Income Statement

For the First Year of Operations

Sales

$Sales

$778,000$

Less: Variable cost of goods sold

Less: Variable cost of goods sold

Contribution margin $fill in the blank $1$ce$004$fc$5$fc$100$f$\_5$

Less:

Fixed overhead

Fixed overhead

Fixed selling and administrative expenses

Fixed selling and administrative expenses

$185,500$

Operating income $fill in the blank $1$ce$004$fc$5$fc$100$f$\_10$

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Use a contribution margin format income statement that groups costs according to behavior $($variable and fixed$)$

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What is the difference between the two income figures?

$fill in the blank e$36$c$94$fb$9$f$90$f$90\_1$