EX 8-23 (Algo) Absorption and Variable Costing (LO 8-1, 8-4) Pandora Brewing Company's planned production for the year just ended was 21,900 units. This production level was achieved, but only 18,700 units were sold. Other data follow: 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 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. Required: 1. What would be Pandora Brewing Company's finished-goods inventory cost on December 31 under the variable-costing method? Note: Do not round intermediate calculations. Answer is complete but not entirely correct. 2-a. Which costing method, absorption or variable costing, would show a higher operating income for the year? 2-b. By what amount? Note: Do not round intermediate calculations. 1. Finished-goods inventory cost 2-a. Higher operating income method 2-b. Difference in reported income $ 650,430 346,020 483,990 201,480 $ 365,730 110,595 None 106,590 x Absorption costing ✓ 40,090 X $
EX 8-23 (Algo) Absorption and Variable Costing (LO 8-1, 8-4) Pandora Brewing Company's planned production for the year just ended was 21,900 units. This production level was achieved, but only 18,700 units were sold. Other data follow: 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 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. Required: 1. What would be Pandora Brewing Company's finished-goods inventory cost on December 31 under the variable-costing method? Note: Do not round intermediate calculations. Answer is complete but not entirely correct. 2-a. Which costing method, absorption or variable costing, would show a higher operating income for the year? 2-b. By what amount? Note: Do not round intermediate calculations. 1. Finished-goods inventory cost 2-a. Higher operating income method 2-b. Difference in reported income $ 650,430 346,020 483,990 201,480 $ 365,730 110,595 None 106,590 x Absorption costing ✓ 40,090 X $
Chapter1: Financial Statements And Business Decisions
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Transcribed Image Text:EX 8-23 (Algo) Absorption and Variable Costing (LO 8-1, 8-4)
Pandora Brewing Company's planned production for the year just ended was 21,900 units. This production level was achieved, but
only 18,700 units were sold. Other data follow:
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
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.
Required:
1. What would be Pandora Brewing Company's finished-goods inventory cost on December 31 under the variable-costing method?
Note: 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?
Note: Do not round intermediate calculations.
Answer is complete but not entirely correct.
106,590 X
1. Finished-goods inventory cost
2-a. Higher operating income method
2-b. Difference in reported income
$
Absorption costing
$ 650,430
346,020
483,990
201,480
365,730
110,595
None
$
40,090 X
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Step 1: Introduce to absorption costing and variable costing method
VIEWStep 2: Working for unit product cost under variable costing method
VIEWStep 3: Working for finished goods inventory on Dec 31 under variable costing
VIEWStep 4: Working for total cost under variable costing
VIEWStep 5: Working for total cost under Absorption Costing
VIEWStep 6: Working for difference in reportable income
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