Carr Company produces a single product. Last year, Carr manufactured 35,250 unit
ID: 2425103 • Letter: C
Question
Carr Company produces a single product. Last year, Carr manufactured 35,250 units and sold 29,700 units. Production costs for the year were as follows: Fixed manufacturing overhead $634,500 Variable manufacturing overhead $267,900 Direct labor $179,775 Direct materials $257,325 Sales were $1,351,350, for the year, variable selling and administrative expenses were $151,470, and fixed selling and administrative expenses were $257,325. There was no beginning inventory. Assume that direct labor is a variable cost. Under variable costing, the company's net operating income for the year would be: Please show calculations. Thank you for the help!
$33,855 lower than under absorption costing
$33,855 higher than under absorption costing
$99,900 lower than under absorption costing
$99,900 higher than under absorption costing
Explanation / Answer
Solution:
Endin Inventory under variable costing Direct Materials 257,325 Direct Labor 179,775 Variable manufacturing overhead 267,900 Total varaiable cost for 35,250 units 705,000 Less: Ending Inventory- $ 705,000/ 35,250 * 5,550 units 111000 Ending inventiry under absorption costing Direct Materials 257,325 Direct Labor 179,775 Variable manufacturing overhead 267,900 Fixed manufacturing overhead 634,500 Total cost of manufacturing 1,339,500 Cost of Ending Inventory - 1339,500 / 35,250 *5,550 210900 Income under more under variable costing by $ 99,900