Question
Absorption and Variable Costing Comparisons Red Arrow Blueberries manufactures blueberry jam. Because of bad weather, its blueberry crop was small. The following data have been
Absorption and Variable Costing Comparisons Red Arrow Blueberries manufactures blueberry jam. Because of bad weather, its blueberry crop was small. The following data have been gathered for the summer quarter of last year:
Beginning inventory (cases) | 0 |
Cases produced | 8,000 |
Cases sold | 7,000 |
Sales price per case | $ 115 |
Direct materials per case | $ 25 |
Direct labor per case | $ 40 |
Variable manufacturing overhead per case | $ 10 |
Total fixed manufacturing overhead | $ 192,000 |
Variable selling and administrative cost per case | $ 2 |
Fixed selling and administrative cost | $ 38,000 |
a) Prepare a functional income statement for the quarter using absorption costing. (Round answers to the nearest dollar. Do not use negative signs with your answers, EXCEPT if you calculate a net loss.)
RED ARROW BLUEBERRIES Functional (Absorption Costing) Income Statement For the Summer Quarter (Last Year) | ||
---|---|---|
Sales | Answer | |
Cost of goods sold: | ||
Variable costs | Answer | |
Fixed costs | Answer | |
Goods available | Answer | |
Ending inventory | Answer | Answer |
Gross profit | Answer | |
Operating expenses: | ||
Variable selling and administrative | Answer | |
Fixed selling and administrative | Answer | Answer |
Net income (loss) | Answer |
b) Prepare a contribution income statement for the quarter using variable costing. (Do not use negative signs with your answers, EXCEPT if you calculate a net loss.)
RED ARROW BLUEBERRIES Contribution (Variable Costing) Income Statement For the Summer Quarter (Last Year) | ||
---|---|---|
Sales | Answer | |
Variable expenses: | ||
Manufacturing | Answer | |
Selling and administrative | Answer | Answer |
Contribution margin | Answer | |
Fixed expenses: | ||
Manufacturing overhead | Answer | |
Selling and administrative | Answer | Answer |
Net income (loss) | Answer |
(c) What is the value of ending inventory under absorption costing? (Round answer to the nearest whole number.) $Answer (d) What is the value of ending inventory under variable costing? $Answer (e) The difference in the value of ending inventory in parts (c) and (d) is explained by the following difference between absorption and variable costing:
Variable costing assigns only variable manufacturing costs to products while absorption costing assigns both variable and fixed manufacturing costs to products.
Variable costing treats all manufacturing costs as variable costs while absorption costing treats only variable manufacturing costs as variable costs.
Absorption costing treats fixed costs as period costs while variable costing treats fixed costs as product costs.
Absorption costing treats all manufacturing costs as period costs while variable costing treats only variable manufacturing costs as period costs.
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