Question
Bob's Burgers makes burger patties for large supermarket chains. The burgers are frozen and can last in storage for months. Cost information on the burgers
Bob's Burgers makes burger patties for large supermarket chains. The burgers are frozen and can last in storage for months. Cost information on the burgers is as follows: Meat used for burgers $200,000 Wages used to make burgers 100,000 Overhead of the factory - variable 50,000 - fixed 70,000 Office staff 60,000 Sales staff 120,000 Bob's salary 50,000 Bob made 500,000 burgers this past year but only sold 450,000 to his customers. He sells them for $1.50 per burger patty. Bob tells you that the office and sales staff are variable costs while his salary is fixed. Instructions a) Calculate Bob's income assuming he uses variable costing. b) Calculate Bob's income assuming he uses absorption costing. c) What are two reasons Bob might prefer to use variable costing for his internal business decisions?
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