Reference no: EM132138493

Question - Pandora Pillow Company's planned production for the year just ended was 10,000 units. This production level was achieved, but only 9,000 units were sold. Other data follow:

Direct material used$40,000 Direct labor incurred 20,000 Fixed manufacturing overhead 25,000 Variable manufacturing overhead 12,000 Fixed selling and administrative expenses 30,000 Variable selling and administrative expenses 4,500 Finished-goods inventory, January 1 None

The cost per unit remained the same in the current year as in the previous year. There were no work-in-process inventories at the beginning or end of the year.

Required:

1. What would be Pandora Pillow Company's finished-goods inventory cost on December 31 under the variable-costing method? (Do not round intermediate calculations.)

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

2-b. By what amount the operating income differs between the costing methods, absorption or variable costing? (Do not round intermediate calculations.)