Chapter 8, Problem 32P

Skinny Dippers, Inc. produces nonfat frozen yogurt. The product is sold in five-gallon containers, which have the following price and variable costs.

Budgeted fixed overhead in 20x1, the company’s first year of operations, was $300,000. Actual production was 150,000 five-gallon containers, of which 125,000 were sold. Skinny Dippers, Inc. incurred the following selling and administrative expenses.

Required:

1. 1. Compute the product cost per container of frozen yogurt under (a) variable costing and (b) absorption costing.
2. 2. Prepare operating income statements for 20x1 using (a) absorption costing and (b) variable costing.
3. 3. Reconcile the operating income reported under the two methods by listing the two key places where the income statements differ.
4. 4. Reconcile the operating income reported under the two methods using the shortcut method.
5. 5. Build a spreadsheet: Construct an Excel spreadsheet to solve all of the preceding requirements. Show how the solution will change if the following information changes: the selling price and direct-material cost per unit are $16.00 and $4.50, respectively.