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Exercise 8-23 Absorption and Variable Costing (LO 8-1, 8-4) Pandora Pillow Company's planned production for the year just ended was 10,000 units. This production level
Exercise 8-23 Absorption and Variable Costing (LO 8-1, 8-4) Pandora Pillow Company's planned production for the year just ended was 10,000 units. This production level was achieved, but only 9,000 units were sold. Other data follow: Direct material used Direct labor incurred Fixed manufacturing overhead Variable manufacturing overhead Fixed selling and administrative expenses Variable selling and administrative expenses Finished-goods inventory, January 1 $40,000 20,000 25,000 12,000 30,000 4,500 None The cost per unit remained the same in the current year as in the previous year. There were no work-in- process inventories at the beginning or end of the year. Required: 1. What would be Pandora Pillow Company's finished-goods inventory cost on December 31 under the variable-costing method? 2. Which costing method, absorption or variable costing, would show a higher operating income for the year? By what amount? 87. Will variable and absorption costing result in signifi- cantly different income measures in a JIT setting? Why
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