Reference no: EM1348409
Great Outdoze Company manufactures sleeping bags, which sell for $67.00 each. The variable costs of production are as follows:
Direct material $ 18.90
Direct labor 9.80
Variable manufacturing overhead 7.50
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Budgeted fixed overhead in 20x1 was $204,000 and budgeted production was 30,000 sleeping bags. The yearâ??s actual production was 30,000 units, of which 27,900 were sold. Variable selling and administrative costs were $1.30 per unit sold; fixed selling and administrative costs were $24,000. The firm does not prorate variances.
Required:
1. Calculate the product cost per sleeping bag under (a) absorption costing and (b) variable costing. ?????
Product Cost
Absorption costing $
Variable costing $
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2. Prepare income statements for 20x1 using:
a. Absorption costing. ?????
GREAT OUTDOZE COMPANY
INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 20x1
ABSORPTION COSTING
b. Variable costing. ?????????
GREAT OUTDOZE COMPANY
INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 20x1
VARIABLE COSTING
3. Reconcile the income reported under the two methods using the shortcut method. What will be the difference in reported income?
Difference $ ??????????
4. Suppose that Great Outdoze Company implemented a JIT inventory and production management system at the beginning of 20x1. In addition, the firm installed a flexible manufacturing system. Would you expect reported income under variable and absorption costing to be different by as great a magnitude as you found in part (3)?
No
Yes
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