Great Outdoze Company manufactures sleeping bags, which sell for $66.30 each. The variable costs of production are as follows: Direct material $ 19.20 Direct labor 10.50 Variable manufacturing overhead 8.10 Budgeted fixed overhead in 20x1 was $140,700 and budgeted production was 21,000 sleeping bags. The year’s actual production was 21,000 units, of which 17,700 were sold. Variable selling and administrative costs were $1.40 per unit sold; fixed selling and administrative costs were $29,000. Required: 1. Calculate the product cost per sleeping bag under (a) absorption costing and (b) variable costing. 2-a. Prepare an operating income statement for the year using absorption costing. 2-b. Prepare an operating income statement for the year using variable costing. 3. Reconcile reported operating income under the two methods using the shortcut method
Problem 8-35 Variable-Costing and Absorption-Costing Income Statements (LO 8-2, 8-3, 8-4, 8-6)
Great Outdoze Company manufactures sleeping bags, which sell for $66.30 each. The variable costs of production are as follows:
| Direct material | $ | 19.20 | |
| Direct labor | 10.50 | ||
| Variable manufacturing |
8.10 | ||
Budgeted fixed overhead in 20x1 was $140,700 and budgeted production was 21,000 sleeping bags. The year’s actual production was 21,000 units, of which 17,700 were sold. Variable selling and administrative costs were $1.40 per unit sold; fixed selling and administrative costs were $29,000.
Required:
1. Calculate the product cost per sleeping bag under (a) absorption costing and (b) variable costing.
2-a. Prepare an operating income statement for the year using absorption costing.
2-b. Prepare an operating income statement for the year using variable costing.
3. Reconcile reported operating income under the two methods using the shortcut method.
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.)
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2)
Prepare an operating income statement for the year using absorption costing. (Do not round intermediate calculations.)
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3)
Prepare an operating income statement for the year using variable costing. (Do not round intermediate calculations.)
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4)
Reconcile reported operating income under the two methods using the shortcut method. (Round your predetermined fixed overhead rate to 2 decimal places.)
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