TroutPro Co. manufactures fishing equipment.During 2016, total costs associated

Question

TroutPro Co. manufactures fishing equipment.During 2016, total costs associated with manufacturing 15,000 tly-cast fishing rods (a new product introduced this year) were as follows: Raw materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead 65,800 17,400 12,800 17,000 Required: a. Calculate the cost per fishing rod under both variable costing and absorption costing (Round your answers to 2 decimal places.) Variable cost per rod Absorption cost per rod each each b. If 330 of these fishing rods were in finished goods inventory at the end of 2016, by how much and in what direction (higher or lower) would 2016 operating income be different under variable costing than under absorption costing? (Do not round intermediate calculations.) under c-1. Express the fishing rod cost in a cost formula (Round your answers to 2 decimal places.) cost c-2. What does this formula suggest the total cost of making an additional 350 fishing rods would be? Round your intermediate calculations and final answer to 2 decimal places.) Reterences Worksheet

Explanation / Answer

Solution a:

Solution b:

Fixed manufacturing overhead cost per unit = $17,000 / 15,000 = $1.1333333

Fixed manufacturing overhead deferred in ending inventory = 330 * $1.1333333 = $374

Under variable costing operating income would lower by $374 than under absorption costing.

Solution c1:

Total cost = $17,000 + $6.40 per fishing rod produced.

Solution c2:

Total cost of making an additional 350 fishing rods = 350 * $6.40 = $2,240

Computation of variable cost per fishing rod Particulars Amount Direct materials $65,800.00 Direct labor $17,400.00 Variable manufacturing overhead $12,800.00 Total variable manufacturing cost $96,000.00 Nos of fishing rod 15000.00 Variable cost per fishing rod $6.40

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