Variable Costing, Absorption Costing

During its first year of operations, Snobegon, Inc. $($located in Lake Snobegon, Minnesota$),$ produced $40,100$ plastic snow

scoops. Snow scoops are oversized shovel$-$type scoops that are used to push snow away. Unit sales were $38,100$ scoops.

Fixed overhead was applied at $$0\mathrm{.}70$ per unit produced. Fixed overhead was underapplied by $$3,000.$ This fixed overhead

variance was closed to Cost of Goods Sold. There was no variable overhead variance. The results of the year's operations

are as follows $($on an absorption$-$costing basis$)$:

Required:

Calculate the cost of the firm's ending inventory under absorption costing. Round unit cost to five decimal places.

Round your final answer to the nearest dollar.

Determine the number of units in ending inventory first. Calculate unit cost after determining unadjusted COGS

$($before adjustment for underapplied fixed overhead$).$

What is the cost of the ending inventory under variable costing? Round unit cost to five decimal places. Round your

final answer to the nearest dollar.

W Check My Work

Take unit cost under absorption less fixed overhead amount per unit to get variable cost per unit for variable

costing.

Prepare a variable$-$costing income statement. Round the unit cost to five decimal places, when required. Round

your final answers to the nearest dollar. Use the rounded values in subsequent computations.

Snobegon, Inc.

Variable$-$Costing Income

Statement

For the First Year of

Operations

Less:

Operating income

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T Check My Work

Use a contribution margin format income statement that groups costs according to behavior $($variable and fixed$)$

What is the difference between the two income figures?

$