Outback Corporation manufactures tactical LED flashlights in Brisbane, Australia. The firm uses an absorption costing system for internal reporting purposes; however, the company is considering using variable costing. Data regarding Outbacks planned and actual operations for 20x1 follow:

	Budgeted Costs
	Per Unit				Total				Actual Costs
Direct material	$	13.00			$	1,807,000			$	1,664,000
Direct labor		9.80				1,362,200				1,254,400
Variable manufacturing overhead		4.40				611,600				563,200
Fixed manufacturing overhead		5.00				695,000				706,000
Variable selling expenses		7.60				1,056,400				934,800
Fixed selling expenses		7.90				1,098,100				1,098,100
Variable administrative expenses		2.60				361,400				319,800
Fixed administrative expenses		2.30				319,700				327,700
Total	$	52.60			$	7,311,400			$	6,868,000

	Planned Activity				Actual Activity
Beginning finished-goods inventory in units		36,000				36,000
Sales in units		139,000				123,000
Production in units		139,000				128,000

The budgeted per-unit cost figures were based on Outback producing and selling 139,000 units in 20x1. Outback uses a predetermined overhead rate for applying manufacturing overhead to its product. A total manufacturing overhead rate of $9.40 per unit was employed for absorption costing purposes in 20x1. Any overapplied or underapplied manufacturing overhead is closed to the Cost of Goods Sold account at the end of the year. The 20x1 beginning finished-goods inventory for absorption costing purposes was valued at the 20x0 budgeted unit manufacturing cost, which was the same as the 20x1 budgeted unit manufacturing cost. There are no work-in-process inventories at either the beginning or the end of the year. The planned and actual unit selling price for 20x1 was $71.90 per unit. Required: Was Outbacks 20x1 operating income higher under absorption costing or variable costing? Also, compute the following: 1. The value of Outback Corporations 20x1 ending finished-goods inventory under absorption costing. 2. The value of Outback Corporations 20x1 ending finished-goods inventory under variable costing. 3. The difference between Outback Corporations 20x1 reported operating income calculated under absorption costing and calculated under variable costing.

• Operating Income

Was Outbacks 20x1 operating income higher under absorption costing or variable costing?

	It was higher under variable costing It was higher under absorption costing

• Required 1

Compute the value of Outback Corporations 20x1 ending finished-goods inventory under absorption costing. (Do not round intermediate calculations.)

	Value of finished-goods inventory

• Required 2

Compute the value of Outback Corporations 20x1 ending finished-goods inventory under variable costing. (Do not round intermediate calculations.)

Value of finished-goods inventory

• Required 3

Compute the difference between Outback Corporations 20x1 reported operating income calculated under absorption costing and calculated under variable costing. (Do not round intermediate calculations.)

Difference in reported income