White Water Rafting Company manufactures kayaks, which sell for $615 each. The variable costs of production (per unit) are as follows:     Direct Material $ 220   Direct labor   135   Variable manufacturing overhead   95     Budgeted fixed overhead in 20x1 was $343,000 and budgeted production was 49,000 kayaks. The year’s actual production was 49,000 units, of which 39,500 were sold. Variable selling and administrative costs were $5 per unit sold; fixed selling and administrative costs were $69,000.   Required: A. Calculate the product cost per kayak under (a) absorption costing and (b) variable costing. B. Prepare operating income statements for the year using (a) absorption costing and (b) variable costing. C. 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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White Water Rafting Company manufactures kayaks, which sell for $615 each. The variable costs of production (per unit) are as follows:
 

 

Direct Material

$

220

 

Direct labor

 

135

 

Variable manufacturing overhead

 

95

 

 


Budgeted fixed overhead in 20x1 was $343,000 and budgeted production was 49,000 kayaks. The year’s actual production was 49,000 units, of which 39,500 were sold. Variable selling and administrative costs were $5 per unit sold; fixed selling and administrative costs were $69,000.
 
Required:

A. Calculate the product cost per kayak under (a) absorption costing and (b) variable costing.
B. Prepare operating income statements for the year using (a) absorption costing and (b) variable costing.
C. Reconcile reported operating income under the two methods using the shortcut method.

 

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