Question
Sierra Grand Corporation produces a single product, the Duffle bag. The company had no beginning inventory and they produced 60,000 units during 2021 and sold
Sierra Grand Corporation produces a single product, the Duffle bag. The company had no beginning inventory and they produced 60,000 units during 2021 and sold 55,000 units. The operating data for 2021 follow:
Sales $1,925,000
Manufacturing costs:
Direct Materials $660,000
Direct labor 165,000
Variable manufacturing overhead 249,000
Fixed manufacturing overhead 300,000
Selling & Administrative expenses:
Fixed $240,000
Variable 192,500
Required:
A). Calculate the value of the ending finished goods inventory under variable costing.
B). Calculate the amount of net income under variable costing.
C). Calculate the amount of net income under absorption coating
D). Explain in detail why the net income differs under the two accounting methods.
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