Problem 8-35 Variable-Costing and Absorption-Costing Income Statements (LO 8-2,8
ID: 2337461 • Letter: P
Question
Problem 8-35 Variable-Costing and Absorption-Costing Income Statements (LO 8-2,8-3, 8-4, 8-6) Great Outdoze Company manufactures sleeping bags, which sell for $65.80 each. The varlable costs of production are as follows: Direct material Direct labor Variable manufacturing overhead $18.B0 overhead 9:70 7.40 Budgeted fixed overhead in 20x1 was $177,500 and budgeted production was 25,000 sleeping bags. The year's actual production was 25,000 units, of which 22,300 were sold. Variable selling and administrative costs were $1.80 per unit sold; fixed selling and administrative costs were $20,000. Required 1. Calculate the product cost per sleeping bag under (a) absorption costing and (b) varlable costing. 2-a. Prepare operating income statements for the year using absorption costing. 2-b. Prepare operating income statements for the year using variable costing. 3. Reconcile reported operating income under the two methods using the shortcut method. Complete this question by entering your answers in the tabs below Req 1 Req 2A Req 28 Req 3 Calculate the product cost per sleeping bag under (a) absorption costing and (b) variable costing. (Do not round intermediate calculations. Round your final answers to 2 decimal places.) Product Cost Per Unit Absorption costing Variable costing Req 1 Req 2AExplanation / Answer
1. Calculate the product cost per sleeping bag under
1. Calculate the product cost per sleeping bag under
(a) absorption costing Direct material 18.8 Direct labor 9.7 Variable manufacturing overhead 7.4 Cost per unit under variable cost 35.9 Fixed overhead per unit under absorption costing 7.1 (177500/25000) Cost per unit under absorption cost 43 (b) variable costing. Direct material 18.8 Direct labor 9.7 Variable manufacturing overhead 7.4 Cost per unit under variable cost 35.9 2-a. Prepare operating income statements for the year using absorption costing. Absorption costing income statement Sales (22300*65.80) 1467340 Less: Cost of goods sold(22300*43) 958900 Gross margin 508440 Less: Selling and administrative expenses Fixed administrative expenses 20,000 Variabe (22300*1.8) 40140 Net profit 448,300 2-b. Prepare operating income statements for the year using variable costing. Variable costing income statement Sales (22300*65.8) 1467340 Less: Cost of goods sold (22300*35.9) 800570 Variabe selling and admin (22300*1) 40140 Gross margin 626630 Less: Fixed Manufacturing 177,500 Fixed Selling and admin 20,000 Net profit Net profit 429,130 3. Reconcile reported operating income under the two methods using the shortcut method. Net profit as per variable costing 429,130 Add: Fixed Manufacturing on unit unsold((177500/25000)*2700) 19170 Net profit as per absorption costing 448,300 Change in inventory ( in units) (25000-22300) 2700 Predetermined fixed overhead rate (177500/25000) 7.1 Absorption costing income-variable costing income (448300-429130) 19,170