Outback, Ltd., manufactures tactical LED flashlights in Melbourne, Australia. Th

Question

Outback, Ltd., manufactures tactical LED flashlights in Melbourne, Australia. The firm uses an absorption-costing system for internal reporting purposes; however, the company is considering using variable costing. Data regarding planned and actual operations for 20x4 follow:

     The budgeted per-unit cost figures were based on the company producing and selling 140,000 units in 20x4. Outback uses a predetermined overhead rate for applying manufacturing overhead to its product. A total manufacturing overhead rate of $4.50 per unit was employed for absorption costing purposes in 20x4. Any overapplied or underapplied manufacturing overhead is closed to the Cost of Goods Sold account at the end of the year. The 20x4 beginning finished-goods inventory for absorption costing purposes was valued at the 20x3 budgeted unit manufacturing cost, which was the same as the 20x4 budgeted unit manufacturing cost. There are no work-in-process inventories at either the beginning or the end of the year. The planned and actual unit selling price for 20x4 was $35 per unit.

Compute the value of Outback’s 20x4 ending finished-goods inventory under absorption costing.

Compute the value of Outback’s 20x4 ending finished-goods inventory under variable costing.

Outback, Ltd., manufactures tactical LED flashlights in Melbourne, Australia. The firm uses an absorption-costing system for internal reporting purposes; however, the company is considering using variable costing. Data regarding planned and actual operations for 20x4 follow:

Explanation / Answer

Budgeted Costs Per Unit Total Actual Costs   Direct material 6.00 840,000 780,000   Direct labor 4.50 630,000 585,000   Variable manufacturing overhead 2.00 280,000 260,000   Fixed manufacturing overhead 2.50 350,000 357,500   Variable selling expenses 4 560,000 500,000   Fixed selling expenses 3.5 490,000 490,000   Variable administrative expenses 1 140,000 125,000   Fixed administrative expenses 1.5 210,000 212,500      Total 25 3,500,000 3,310,000 Sales units          140,000 125,000 Production          140,000          130,000 Opening inventory             35,000 35,000 Clsoing Inventory            40,000 Cost of closing Inventory Absorption Costing Details Per Unit Amt $ Sales Revenue 35             4,375,000 Cost Of Production Opening Inventory 15                525,000 Add   Direct material 6 780,000 Add   Direct labor 4.5 585,000 Add   Variable manufacturing overhead 2 260,000 Add   Fixed manufacturing overhead 357,500 Less Overapplied Fixed Mfg OH -7,500 Total production cost 15.15 2,500,000 Less Closing Inventory 15.15              (606,000) Costof Goods Sold             1,894,000 So value of closing Inventory $      606,000.00 Cost of closing Inventory variable Costing Details Per Unit Amt $ Sales Revenue 35             4,375,000 Variable Cost Of Production Opening Inventory 12.5                437,500 Add   Direct material 6 780,000 Add   Direct labor 4.5 585,000 Add   Variable manufacturing overhead 2 260,000 Less Less Closing Inventory 12.5              (500,000) Costof Goods Sold             1,562,500 So value of closing Inventory $      500,000.00

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