Variable Costing, Absorption Costing During its first year of operations, Snobegon, Inc. (located in Lake Snobegon, Minnesota), produced 40,000 plastic snow scoops. Snow scoops are oversized shovel-type scoops that are used to push snow away. Unit sales were 38,500 scoops. Fixed overhead was applied at $0.70 per unit produced. Fixed overhead was underapplied by $2,500. This fixed overhead variance was closed to Cost of Goods Sold. There was no variable overhead variance. The results of the year's operations are as follows (on an absorption-costing basis): Sales (38,500 units @ $20) $770,000 Less: Cost of goods sold 550,260      Gross margin $219,740 Less: Selling and administrative expenses (all fixed) 185,500      Operating income $ 34,240 Required: Question Content Area 1. Calculate the cost of the firm's ending inventory under absorption costing. Round unit cost to five decimal places. Round your final answer to the nearest dollar. $fill in the blank df964c035ff1f9e_1   Question Content Area What is the cost of the ending inventory under variable costing? Round unit cost to five decimal places. Round your final answer to the nearest dollar. $fill in the blank 459245ff3032025_1   Question Content Area 2. Prepare a variable-costing income statement. Round the unit cost to five decimal places, when required. Round your final answers to the nearest dollar. Use the rounded values in subsequent computations. Snobegon, Inc.Variable-Costing Income StatementFor the First Year of Operations   $- Select -   - Select - Contribution margin $fill in the blank 3d0182fb006401d_5 Less:     - Select -   - Select - Operating income $fill in the blank 3d0182fb006401d_10   Question Content Area What is the difference between the two income figures? $fill in the blank bd3118f77fd003b_1

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Variable Costing, Absorption Costing

During its first year of operations, Snobegon, Inc. (located in Lake Snobegon, Minnesota), produced 40,000 plastic snow scoops. Snow scoops are oversized shovel-type scoops that are used to push snow away. Unit sales were 38,500 scoops. Fixed overhead was applied at $0.70 per unit produced. Fixed overhead was underapplied by $2,500. This fixed overhead variance was closed to Cost of Goods Sold. There was no variable overhead variance. The results of the year's operations are as follows (on an absorption-costing basis):

Sales (38,500 units @ $20) $770,000
Less: Cost of goods sold 550,260
     Gross margin $219,740
Less: Selling and administrative expenses (all fixed) 185,500
     Operating income $ 34,240

Required:

Question Content Area

1. Calculate the cost of the firm's ending inventory under absorption costing. Round unit cost to five decimal places. Round your final answer to the nearest dollar.
$fill in the blank df964c035ff1f9e_1

 

Question Content Area

What is the cost of the ending inventory under variable costing? Round unit cost to five decimal places. Round your final answer to the nearest dollar.
$fill in the blank 459245ff3032025_1

 

Question Content Area

2. Prepare a variable-costing income statement. Round the unit cost to five decimal places, when required. Round your final answers to the nearest dollar. Use the rounded values in subsequent computations.

Snobegon, Inc.Variable-Costing Income StatementFor the First Year of Operations
 
$- Select -
 
- Select -
Contribution margin $fill in the blank 3d0182fb006401d_5
Less:  
 
- Select -
 
- Select -
Operating income $fill in the blank 3d0182fb006401d_10
 

Question Content Area

What is the difference between the two income figures?
$fill in the blank bd3118f77fd003b_1

 
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