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Comfort Corporation manufactures and sells various types of chairs. The below are the costing details of a chair model, namely, Curver: Variable manufacturing cost per
Comfort Corporation manufactures and sells various types of chairs. The below are the costing details of a chair model, namely, Curver:
- Variable manufacturing cost per unit = $60
- Total fixed manufacturing cost for the year = $1,500,000
- Variable selling and administrative expense per unit sold = $5
- Total fixed selling and administrative cost for the year = $230,000
- Predetermined overhead rate being computed based on the expected production of 100,000 units
The selling price for the chairs was $150 each.
- If Comfort used the normal absorption costing method with all over/under-applied of fixed manufacturing costs directly written off to cost of goods sold, what would be the net operating income on the sale of Curver in its first year when 120,000 chairs being produced instead of the 100,000 expected production? Comfort managed to sell 100,000 chairs.
- Based on your answer for Question 5, what would have been the difference in profit if the variable costing format was used instead? A complete variable income statement is not required.
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