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Variable Costing, Absorption Costing During its first year of operations, Snobegon, Inc. (located in Lake Snobegon, Minnesota), produced 41,000 plastic snow scoops. Snow scoops are

Variable Costing, Absorption Costing

During its first year of operations, Snobegon, Inc. (located in Lake Snobegon, Minnesota), produced 41,000 plastic snow scoops. Snow scoops are oversized shovel-type scoops that are used to push snow away. Unit sales were 38,000 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 year's operations are as follows (on an absorption-costing basis):

Sales (38,000 units @ $20) $760,000
Less: Cost of goods sold 548,260
Gross margin $211,740
Less: Selling and administrative expenses (all fixed) 184,500
Operating income $ 27,240

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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 overhead

Fixed selling and administrative expenses

Sales

Variable cost of goods sold

$- Select -

Less: Fixed overhead

Less: Fixed selling and administrative expenses

Less: Sales

Less: Variable cost of goods sold

- Select -
Contribution margin $
Less:

Fixed overhead

Sales

Variable cost of goods sold

- Select -

Fixed selling and administrative expenses

Operating income

Sales

Variable cost of goods sold

- Select -
Operating income $

Question Content Area

What is the difference between the two income figures?

$_____________________

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