Variable Costing, Absorption Costing During its first year of operations, Snobegon, Inc. (located in Lake Snobegon, Minnesota), produced 40,700 plastic snow scoops. Snow scoops are oversized shovel-type scoops that are used to push snow away. Unit sales were 38,700 scoops. Fixed overhead was applied at $0.75 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 years operations are as follows (on an absorption-costing basis): Sales (38,700 units @ $20) $774,000 Less: Cost of goods sold 548,960 Gross margin $225,040 Less: Selling and administrative expenses (all fixed) 184,500 Operating income $ 40,540 Required:

1. (a) Calculate the cost of the firms ending inventory under absorption costing. Round unit cost to five decimal places. Round your final answer to the nearest dollar.

$

1. (b) 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. $ Feedback Take unit cost under absorption less fixed overhead amount per unit to get variable cost per unit for variable costing.

2. (a) Prepare a variable-costing income statement. Round the unit cost to five decimal places, when required. Round your final answers to the nearest dollar.

2. (b) What is the difference between the two income figures? $