Problem 8-34 Variable versus Absorption Costing (LO 8-1, 8-4) Outback Corporation manufactures tactical LED flashlights in Brisbane, Australia. The firm uses an absorption costing system for internal reporting purposes; however, the company is considering using varia costing. Data regarding Outback's planned and actual operations for 20x1 follow: Budgeted Costs Total $1,647,000 1,336,500 648,000 594,000 1,026,000 985,500 405,000 297,000 Per Unit Actual Costs $1,549,400 1,257,300 609,600 602,000 881,600 985,500 348,000 303,000 $6,536,400 Direct material 12.20 Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling expenses Fixed selling expenses Variable administrative expenses Fixed administrative expenses 9.90 4.80 4.40 7.60 7.30 3.00 2.20 Total 51.40 $6,939,000 Beginning finished-goods inventory in units Sales in units Production in units Planned Activity 42,000 135.000 Actual Activity 42,000 116,000 127,000 135,000
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
1)Compute the value of Outback Corporation’s 20x1 ending finished-goods inventory under absorption costing. (Do not round intermediate calculations.)
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2)
Compute the value of Outback Corporation’s 20x1 ending finished-goods inventory under variable costing. (Do not round intermediate calculations.)
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3)
Compute the difference between Outback Corporation’s 20x1 reported operating income calculated under absorption costing and calculated under variable costing. (Do not round intermediate calculations.)
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