Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Sunrise Pools and Spas manufactures fibreglass forms for in-ground pools and swim spas for all-season use. The company uses variable costing for internal management reports

Sunrise Pools and Spas manufactures fibreglass forms for in-ground pools and swim spas for all-season use. The company uses variable costing for internal management reports and absorption costing for external reports to shareholders, creditors, and the government. The company has provided the data for their swim spa business in years 1, 2, and 3 shown below.

The companys fixed manufacturing overhead per unit was constant at $3,500 for all three years:

Year 1 Year 2 Year 3
Inventories:
Beginning (units) 200 260 200
Ending (units) 260 200 300
Variable costing operating income $ 293,400 $ 270,200 $ 252,800

Required:

1. Determine each years absorption costing operating income. Present your answer in the form of a reconciliation report.

2-a. In year 4, the companys variable costing operating income was $250,200 and its absorption costing operating income was $220,200. Did inventories increase or decrease during year 4?

multiple choice

Increase

Decrease

2-b. How much fixed manufacturing overhead cost was deferred or released from inventory during year 4?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting What The Numbers Mean

Authors: David Marshall, Wayne William McManus, Daniel Viele

7th Edition

0073011215, 9780073011219

More Books

Students also viewed these Accounting questions

Question

d. Is the program accredited?

Answered: 1 week ago