Great Outdoze Company manufactures sleeping bags, which sell for $65.90 each. Th
ID: 2560858 • Letter: G
Question
Great Outdoze Company manufactures sleeping bags, which sell for $65.90 each. The variable costs of production are as follows:
Budgeted fixed overhead in 20x1 was $163,800 and budgeted production was 26,000 sleeping bags. The year’s actual production was 26,000 units, of which 23,000 were sold. Variable selling and administrative costs were $1.80 per unit sold; fixed selling and administrative costs were $24,000.
Required:
1. Calculate the product cost per sleeping bag under (a) absorption costing and (b) variable costing. (Do not round intermediate calculations. Round your final answers to 2 decimal places.)
2. Prepare operating income statements for the year using absorption costing. (Do not round intermediate calculations.)
3.
4. Reconcile reported operating income under the two methods using the shortcut method. (Round your predetermined fixed overhead rate to 2 decimal places.)
1. Calculate the product cost per sleeping bag under (a) absorption costing and (b) variable costing.
2-a. Prepare operating income statements for the year using absorption costing.
2-b. Prepare operating income statements for the year using variable costing.
3. Reconcile reported operating income under the two methods using the shortcut method.
Direct material $ 19.20 Direct labor 9.40 Variable manufacturing overhead 7.60 GREAT OUTDOZE, INC Operating Income Statement For the Year Ended December 31, 20x1 Variable Costing Variable expenses Fixed expensesExplanation / Answer
1) Product cost under Absorption Variable costing costing direct materials 19.2 19.2 direct labor 9.4 9.4 variable manufacturing overhead 7.6 7.6 fixed manufacturing OH (163,800/26000) 6.3 unit product cost 42.5 36.2 2) Absorption costing income statement sales (23000*65.90)= 1515700 less cost of goods sold (23000*42.50) 977500 Gross profit 538200 Selling and Administrative expenses variable selling & adm (23000*1.8) 41400 fixed selling and administrative expense 24,000 Net operating income 472,800 3) Variable costing income statement sales 1515700 less variable expense variable cost of goods sold (23000*36.2) 832600 Variable selling and contribution expense 41,400 Contribution margin 641,700 less fixed expense fixed manufacturing overhead 163,800 fixed selling and administrative expense 24,000 Net operating income 453,900 4) change in inventory(units) * predetermined = absorption costing fixed overhead minus variable costing rate income 3000 unit increase * 6.3 = 18,900
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