Great Outdoze Company manufactures sleeping bags, which sell for $66.70 each. The variable costs of production are as follows: Direct material Direct labor $18.90 10.50 Variable manufacturing overhead 7.00 Budgeted fixed overhead in 20x1 was $142,600 and budgeted production was 23,000 sleeping bags. The year's actual production was 23,000 units, of which 20,500 were sold. Variable selling and administrative costs were $1.40 per unit sold; fixed selling and administrative costs were $28.000. 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.
Great Outdoze Company manufactures sleeping bags, which sell for $66.70 each. The variable costs of production are as follows: Direct material Direct labor $18.90 10.50 Variable manufacturing overhead 7.00 Budgeted fixed overhead in 20x1 was $142,600 and budgeted production was 23,000 sleeping bags. The year's actual production was 23,000 units, of which 20,500 were sold. Variable selling and administrative costs were $1.40 per unit sold; fixed selling and administrative costs were $28.000. 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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Great Outdoze Company manufactures sleeping bags, which sell for $66.70 each. The variable costs of production are as follows:
Direct material
Direct labor
S 18.90
10.50
Variable manufacturing overhead 7.00
Budgeted fixed overhead in 20x1 was $142,600 and budgeted production was 23,000 sleeping bags. The year's actual production was 23,000 units, of which 20,500 were sold. Variable selling and administrative costs were
$1.40 per unit sold; fixed selling and administrative costs were $28,000.
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.
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