Tip-Top Teak makes storage sheds. Each of their products sells for $1,500. For each shed, the costs of materials total to $200, labor costs are $350, and fixed manufacturing overhead is $500. Tip-top also incurs $65 in variable selling expenses per shed and $100,000 in total fixed selling costs. For the current year, Tip-top made 750 sheds and sold 700 sheds.
Required:
a. Under variable costing, what is the inventoriable cost per unit for each of the 50 sheds put into inventory?
b. Under absorption costing, what is the inventoriable cost per unit for each of the 50 sheds put into inventory?
c. Suppose Tip-top began the year with zero inventories of sheds. What is the difference between the incomes that would be reported under absorption costing and under variable costing?