P22-7B Link Back to Chapter 19 (Manufacturing Company Income Statement) and Chapter 20 (Manufacturing Overhead). Spacesaver Corporation
Question:
P22-7B Link Back to Chapter 19 (Manufacturing Company Income Statement) and Chapter 20 (Manufacturing Overhead). Spacesaver Corporation manufactures plastic storage bins, which it sells for $8 each. The company uses the FIFO inventory costing method, and it computes a new monthly fixed manufacturing overhead rate based on the actual number of bins pro- duced that month. All costs and production levels are exactly as planned. The following data are from Spacesaver's first two months in business: January 20X4 February 20X4 Sales Production Variable manufacturing expense per bin. Sales commission expense per bin. 1.000 bins 1,200 bins 1,400 bins 1.000 bins. $4 $4 $1 $1 Total fixed manufacturing overhead. $700 $700 Total fixed marketing and administrative expenses. $600 $600 Required 1. Compute the product cost per bin produced under absorption costing and under variable costing. Do this first for January and then for February. 2. Prepare separate monthly income statements for January and for February, using
a. Absorption costing
b. Variable costing 3. Is operating income higher under absorption costing or variable costing in January? In February? Explain the pattern of differences in operating income based on absorption costing versus variable costing.
Step by Step Answer:
Accounting
ISBN: 9780130906991
5th Edition
Authors: Charles T. Horngren, Walter T. Harrison, Linda S. Bamber, Betsy Willis, Becky Jones