Exercise 18.16 (Algorithmic) Variable Costing, Absorption Costing

During its first year of operations, Snobegon, Inc. (located in Lake Snobegon, Minnesota), produced 40,800 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 $0.80 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 years operations are as follows (on an absorption-costing basis):

Sales (38,900 units @ $20)	$778,000
Less: Cost of goods sold	547,660
Gross margin	$230,340
Less: Selling and administrative expenses (all fixed)	185,500
Operating income	$ 44,840

Required:

1. Calculate the cost of the firms 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.)

Prepare a variable costing Income Statement

Sales	_____?_____
Less: Variable Cost of Goods Sold	_____?_____
Contribution Margin	_____?_____
Less:
Fixed Overhead	_____?_____
Fixed Selling and Administrative Expenses	_____?_____
Operating Income	_____?_____