Answered step by step
Verified Expert Solution
Question
1 Approved Answer
ReVitalAde produced 14,000 cases of powdered drink mix and sold 11,000 cases in April 2016. The sales price was $28, variable costs were $9 per
ReVitalAde produced 14,000 cases of powdered drink mix and sold 11,000 cases in April 2016. The sales price was $28, variable costs were $9 per case ($7 manufacturing and $2 selling and administrative), and total fixed costs were $80,000 ($56,000 manufacturing and $24,000 selling and administrative). The company had no beginning Finished Goods Inventory. ReVitalAde calculated the cost per unit and the total cost of the 3,000 cases in Finished Goods Inventory as of April 30 using both the absorption and variable costing methods. The calculations are presented below. (Click the icon to view the calculations using the absortion and variable costing methods.) Read the requirements. Requirement 1. Which costing method produces the highest operating income? Explain why. The absorption cost method produces the highest operating income. The primary reason for this is that in absorption costing, the fixed manufacturing overhead costs are distributed across the entire production run as part of the unit cost. Under the absorption costing method,of fixed manufacturing costs are Under the variable costing method, this amount is
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started