Chapter 8, Problem 22E

Easton Pump Company’s planned production for the year just ended was 20,000 units. This production level was achieved, and 21,000 units were sold. Other data follow:

The cost per unit remained the same in the current year as in the previous year. There were no work-in-process inventories at the beginning or end of the year.

Required:

1. 1. What would be Easton Pump Company’s finished-goods inventory cost on December 31 under the variable-costing method?
2. 2. Which costing method, absorption or variable costing, would show a higher operating income for the year? By what amount?