Pinellas Pillow Company’s planned production for the year just ended was 22,400
ID: 2584877 • Letter: P
Question
Pinellas Pillow Company’s planned production for the year just ended was 22,400 units. This production level was achieved, but only 19,000 units were sold. Other data follows:
What would be Pinellas Pillow Company’s finished-goods inventory cost on December 31 under the variable-costing method? (Do not round your intermediate calculations.)
Which costing method, absorption or variable costing, would show a higher operating income for the year?
Pinellas Pillow Company’s planned production for the year just ended was 22,400 units. This production level was achieved, but only 19,000 units were sold. Other data follows:
Explanation / Answer
1 Finished-goods inventory cost =(660800+342720+208320)/22400*3400= 183940 2a Absorption costing would show a higher operating income for the year 2b Difference in reported income = (456960/22400)*3400= 69360