Question
E8.24 Calculate the manufacturing cost under absorption and variable costing and explain the difference. (LO 1, 2) Hardwood Inc. produces mostly wooden crates used for
E8.24 Calculate the manufacturing cost under absorption and variable costing and explain the difference. (LO 1, 2) Hardwood Inc. produces mostly wooden crates used for shipping products by ocean freighter. In 2020, Hardwood incurred the following costs: Wood used $54,000 Nails (considered insignificant and a variable expense) 350 Direct labour 43,000 Utilities for the plant: $1,500 each month, plus $0.50 for each kilowatt hour used each month Rent expense for plant for year 21,400 Assume Hardwood used an average of 500 kilowatt hours of utilities per month over the past year. 19 Instructions a. Calculate Hardwood's total manufacturing cost if it uses a variable-costing approach. b. Calculate Hardwood's total manufacturing cost if it uses an absorption-costing approach. c. Determine the reason for the difference between manufacturing costs under these two costing approaches.
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