I do not know how to solve this problem. 13-B3 Comparison of Variable Costing an

Question

I do not know how to solve this problem.
13-B3 Comparison of Variable Costing and Absorption Costing
Consider the following information pertaining to a year’s operations of Youngstown Manufacturing:
Units sold 1,400
Units produced 1,600
Direct labor $4,200
Direct materials used 3,500
Fixed manufacturing overhead 2,200
Variable manufacturing overhead 300
Selling and administrative expenses (all fixed) 700
Beginning inventories 0
Contribution margin 5,600
Direct-material inventory, end 800
There are no work-in-process inventories.
1. What is the ending finished-goods inventory cost under absorption costing?
2. What is the ending finished-goods inventory cost under variable costing?

Explanation / Answer

First we need the actual units in ending inventory. We can see that the units produced were 1600, but we only sold 1400. Therefore, we have 200 units left over.

Now, we must determine the unit product costs under each method and as such (divide each by 1600 because thats how many units we produces, multiply by 200 because that's our ending inventory):

Absorption: DM + DL + VFOH + FFOH
[(3500/1600) + (4200/1600) + (300/1600) + (2200/1600) * 200] = $1275

Variable: DM+DL+VFOH
[(3500/1600) + (4200/1600) + (300/1600) * 200] = $1000

Related Questions

Navigate

• Browse (All)
• Browse I
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.