Question
During its first year of operations, Snobegon, Inc. (located in Lake Snobegon, Minnesota), produced 40,400 plastic snow scoops. Snow scoops are oversized shovel-type scoops that
During its first year of operations, Snobegon, Inc. (located in Lake Snobegon, Minnesota), produced 40,400 plastic snow scoops. Snow scoops are oversized shovel-type scoops that are used to push snow away. Unit sales were 38,900 scoops. Fixed overhead was applied at $0.75 per unit produced. Fixed overhead was underapplied by $2,800. This fixed overhead variance was closed to Cost of Goods Sold. There was no variable overhead variance. The results of the year's operations are as follows (on an absorption-costing basis):
Sales (38,900 units @ $20) | $778,000 |
Less: Cost of goods sold | 547,560 |
Gross margin | $230,440 |
Less: Selling and administrative expenses (all fixed) | 185,500 |
Operating income | $ 44,940 |
Required:
1. Calculate the cost of the firm's ending inventory under absorption costing. Round unit cost to five decimal places. Round your final answer to the nearest dollar. $___________
What is the cost of the ending inventory under variable costing? Round unit cost to five decimal places. Round your final answer to the nearest dollar. $___________
2. Prepare a variable-costing income statement. Round the unit cost to five decimal places, when required. Round your final answers to the nearest dollar. Use the rounded values in subsequent computations.
Sales | $___________ |
Less: Variable cost of goods sold | ________ |
Contribution margin | $_______ |
Less: | |
Fixed overhead | __________ |
Fixed selling and administrative expenses | _________ |
Operating income | $_________ |
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