Question
Skinny Dippers, Inc., produces nonfat frozen yogurt which it sells to restaurants and ice cream shops. The product is sold in 10-gallon containers, which have
Skinny Dippers, Inc., produces nonfat frozen yogurt which it sells to restaurants and ice cream shops. The product is sold in 10-gallon containers, which have the following price and variable costs. |
Sales price | $ | 50 | |
Direct material | 18 | ||
Direct labor | 12 | ||
Variable overhead | 12 | ||
|
Budgeted fixed overhead in 20x4, the companys first year of operations, was $400,000. Actual production was 200,000 10-gallon containers, of which 190,000 were sold. Skinny Dippers, Inc. incurred the following selling and administrative expenses. |
Fixed | $ | 400,000 | for the year |
Variable | $ | 2 | per container sold |
|
Required: |
1. | Compute the per unit product cost per container of frozen yogurt under variable costing and absorption costing. |
2. | Prepare operating income statements for the year 20x4 using: |
a. | Absorption costing. |
b. | Variable costing. |
3. | Reconcile the operating income reported under the two methods by listing the two key places where the income statements differ. |
4. | Reconcile the operating income reported under the two methods using the shortcut method. |
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