Question
The following financial information has been provided by Snow Action Sports Inc., which manufactures downhill skis. The company uses variable costing for internal management reports
The following financial information has been provided by Snow Action Sports Inc., which manufactures downhill skis. The company uses variable costing for internal management reports and absorption costing for external reports to shareholders, creditors, and the government.
Year 1 Year 2 Year 3
Inventory (in units):
Opening Balance 225 240 300
Ending balance 240 225 300
Variable costing operating income 486,600 403,800 377,700
Fixed manufacturing overhead per unit was constant at $3,750 for all three years.
Required:
1. Determine each years absorption costing operating income. Show all required calculations, neatly presented.
2. In year 4, the companys variable costing operating income was $360,300 and its absorption costing operating income was $307,800. How much fixed manufacturing overhead cost was deferred or released from inventory during year 4?
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