Spicer Company produces and sells wooden pallets that are used for moving and stacking materials. The operating

Question:

Spicer Company produces and sells wooden pallets that are used for moving and stacking materials. The operating costs for the past year were as follows:
Variable costs per unit:
Direct materials ......$ 2.45
Direct labor .........2.10
Variable overhead ........0.25
Variable selling .........0.30
Fixed costs per year:
Fixed overhead ......180,000
Selling and administrative ...56,000
During the year, Spicer produced 200,000 wooden pallets and sold 208,000 at $9 each. Spicer had 11,300 pallets in beginning finished goods inventory; costs have not changed from last year to this year. An actual cost system is used for product costing.

Required:
1. What is the per-unit inventory cost that will be reported on Spicer’s at the end of the year? How many units are in ? What is the total cost of ?
2. Calculate absorption-costing income.
3. What would the per-unit inventory cost be under variable costing? Does this differ from the unit cost computed in Requirement 1? Why?
4. Calculate variable-costing income.
5. Suppose that Spicer Company had sold 196,700 pallets during the year. What would absorption-costing income have been? Variable-costing income?

Ending Inventory
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