During its first year of operations, Snobegon, Inc. (located in Lake Snobegon, Minnesota), produced 40,300 plastic snow scoops. Snow scoops are oversized shovel-type scoops that are used to push snow away. Unit sales were 38,600 scoops. Fixed overhead was applied at $0.70 per unit produced. Fixed overhead was underapplied by $2,700. 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 (38,600 units @ $20)	$772,000
Less: Cost of goods sold	548,160
Gross margin	$223,840
Less: Selling and administrative expenses (all fixed)	185,500
Operating income	$ 38,340

Required:

Question Content Area

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.

Snobegon, Inc. Variable-Costing Income Statement For the First Year of Operations

Sales	$_________
Less: Variable cost of goods sold	________
Contribution margin	$_________
Less:
Fixed overhead	______
Fixed selling and administrative expenses	______
Operating income	$_______

What is the difference between the two income figures? $________