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 38,800 scoops. Fixed overhead was applied at $0.70 per unit produced. Fixed overhead was underapplied by $2,600. 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):

Sales (38,800 units @ $20)	$776,000
Less: Cost of goods sold	546,660
Gross margin	$229,340
Less: Selling and administrative expenses (all fixed)	185,500
Operating income	$ 43,840

Required:

Question Content Area

1. 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. $___________

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. $___________

2. 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

Fixed overheadFixed selling and administrative expensesSalesVariable cost of goods sold	$- Select -
Less: Fixed overheadLess: Fixed selling and administrative expensesLess: SalesLess: Variable cost of goods sold	- Select -
Contribution margin	$fill in the blank 215b06ff600bff1_5
Less:
Fixed overheadSalesVariable cost of goods sold	- Select -
Fixed selling and administrative expensesOperating incomeSalesVariable cost of goods sold	- Select -
Operating income	$fill in the blank 215b06ff600bff1_10

What is the difference between the two income figures? $_______________________