Great Outdoze Company manufactures sleeping bags, which sell for $67.00 each. The variable costs of production are as follows: Direct material Direct labor $18.20 9.10 7.00 Variable manufacturing overhead Budgeted fixed overhead in 20x1 was $160,000 and budgeted production was 20,000 sleeping bags. The year's actual production was 20,000 units, of which 16,700 were sold. Variable selling and administrative costs were $1.90 per unit sold; fixed selling and administrative costs were $25,000. 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.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Great Outdoze Company manufactures sleeping bags, which sell for $67.00 each. The variable costs of production are as follows:
$18.20
9.10
7.00
Direct material
Direct labor
Variable manufacturing overhead
Budgeted fixed overhead in 20x1 was $160,000 and budgeted production was 20,000 sleeping bags. The year's actual production
was 20,000 units, of which 16,700 were sold. Variable selling and administrative costs were $1.90 per unit sold; fixed selling and
administrative costs were $25,000.
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.
Transcribed Image Text:as Great Outdoze Company manufactures sleeping bags, which sell for $67.00 each. The variable costs of production are as follows: $18.20 9.10 7.00 Direct material Direct labor Variable manufacturing overhead Budgeted fixed overhead in 20x1 was $160,000 and budgeted production was 20,000 sleeping bags. The year's actual production was 20,000 units, of which 16,700 were sold. Variable selling and administrative costs were $1.90 per unit sold; fixed selling and administrative costs were $25,000. 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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