Problem 8-35 Variable-Costing and Absorption-Costing Income Statements (LO 8-2, 8-3, 8-4, 8-6)

Great Outdoze Company manufactures sleeping bags, which sell for $67.00 each. The variable costs of production are as follows:

Direct material	$	18.50
Direct labor		9.50
Variable manufacturing overhead		7.20

Budgeted fixed overhead in 20x1 was $169,400 and budgeted production was 22,000 sleeping bags. The years actual production was 22,000 units, of which 19,700 were sold. Variable selling and administrative costs were $2.10 per unit sold; fixed selling and administrative costs were $29,000. 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.

Please share Question 3 -Answer.

change in inventory(in Units) X Predetermined fixed overhead rate = Absorption-costing income minus variable-costing income