Easton Pump Company’s planned production for the year just ended was 19,000 unit

Question

Easton Pump Company’s planned production for the year just ended was 19,000 units. This production level was achieved, and 21,600 units were sold.

Other data follow:

1. What would be Easton Pump Company’s finished-goods inventory cost on December 31 under the variable-costing method? (Do not round intermediate calculations.)

2-a. Which costing method, absorption or variable costing, would show a higher operating income for the year?

2-b. By what amount? (Do not round intermediate calculations.)

Every time I have completed the problem my answers have been wrong. Please help

Direct material used Direct labor incurred Fixed manufacturing overhead Variable manufacturing overhead Fixed selling and administrative expenses Variable selling and administrative expenses Finished-goods inventory, January 1 $589,000 273,600 418,000 191,900 347,700 95,950 3,300 units The cost per unit remained the same in the current year as in the previous year. There were no work-in-process inventories at the beginning or end of the year.

Explanation / Answer

Unit variable product cost=(589000+273600+191900)/19000= $55.5 1 Finished goods inventory units=3300-(21600-19000) Finished-goods inventory cost on December 31 under the variable-costing method= $38850 2a Variable costing, would show a higher operating income for the year b Amount of net income difference=(418000/19000*2600)= $57200

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