Great Outdoze Company manufactures sleeping bags, which sell for $66.10 each. The variable costs of production are as follows: Direct material $ 20.00 Direct labor 10.10 Variable manufacturing overhead 6.20 Budgeted fixed overhead in 20x1 was $232,000 and budgeted production was 29,000 sleeping bags. The years actual production was 29,000 units, of which 26,000 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.

	Product Cost Per Unit
Absorption costing
Variable costing

2-a. Prepare operating income statements 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
	$0
Selling and Administrative Expenses
	$0

2-b. Prepare operating income statements 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:
	$0
Fixed expenses:
	$0

3. Reconcile reported operating income under the two methods using the shortcut method.

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