Great Outdoze Company manufactures sleeping bags, which sell for $65.10 each. The variable costs of production are as follows:

Direct material	$	19.80
Direct labor		9.70
Variable manufacturing overhead		6.90

Budgeted fixed overhead in 20x1 was $216,000 and budgeted production was 27,000 sleeping bags. The years actual production was 27,000 units, of which 23,400 were sold. Variable selling and administrative costs were $1.30 per unit sold; fixed selling and administrative costs were $27,000. Required: 1. Calculate the product cost per sleeping bag under (a) absorption costing and (b) variable costing. 2-a. Prepare an operating income statement for the year using absorption costing. 2-b. Prepare an operating income statement for the year using variable costing. 3. Reconcile reported operating income under the two methods using the shortcut method.

• Req 1

Calculate the product cost per sleeping bag under (a) absorption costing and (b) variable costing. (Do not round intermediate calculations. Round your final answers to 2 decimal places.)

	Product Cost Per Unit
Absorption costing
Variable costing

• Req 2A

Prepare an operating income statement for the year using absorption costing. (Do not round intermediate calculations.)

GREAT OUTDOZE, INC.
Operating Income Statement For the Year Ended December 31, 20x1
Absorption Costing
Selling and Administrative Expenses

• Req 2B

Prepare an operating income statement for the year using variable costing. (Do not round intermediate calculations.)

GREAT OUTDOZE, INC.
Operating Income Statement For the Year Ended December 31, 20x1
Variable Costing
Variable expenses:
Fixed expenses:

• Req 3

Reconcile reported operating income under the two methods using the shortcut method. (Round your predetermined fixed overhead rate to 2 decimal places.)

Change in inventory (in units)			Predetermined fixed overhead rate	=	Absorption-costing income minus variable-costing income
	unit increase			=