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Manta Ray Company manufactures diving masks with a variable cost of $24. The masks sell for $33. Budgeted fixed manufacturing overhead for the most recent
Manta Ray Company manufactures diving masks with a variable cost of $24. The masks sell for $33. Budgeted fixed manufacturing overhead for the most recent year was $845,500. Actual production was equal to planned production. Required: State whether operating income is higher under variable or absorption costing and the amount of the difference in reported operating income under the two methods. Treat each condition as an independent case. (Do not round intermediate calculations.) 1. Production Sales 2. Production Sales 3. Production Sales 111,250 units 108,750 units 95,000 units 100,500 units 79,800 units 79,800 units Amount of Difference Income Higher Under (Method) 1. Absorption costing 2. Variable costing 3. Same under both Easton Pump Company's planned production for the year just ended was 18,700 units. This production level was achieved, and 21,100 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 $579,700 286,110 402,050 188,870 340,340 107,525 3,200 units 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 Easton Pump Company's finished-goods inventory cost on December 31 under the variable-costing method? (Do not round intermediate calculations.) 2-a. Which costing method, absorption or variable costing, would show a higher operating income for the year? 2-b. By what amount? (Do not round intermediate calculations.) 1. Finished-goods inventory cost 2-a. Higher operating income method 2-b. Difference in reported income Variable costing
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