Chapter 8, Problem 44C

1.

To determine

Explain the reason why the ending balance of finished goods inventory for year 1 is higher if company L is using absorption costing and variable costing.

2.

To determine

Explain the reason why the ending balance of finished goods inventory for year 2 is same under both absorption and variable costing.

3.

To determine

Explain whether the given relationship between the absorption and variable costing will always true at any balance sheet date.

4.

To determine

Calculate the declined amount of finished goods inventory during year 2 under absorption costing and variable costing.

5.

To determine

Calculate the difference in the amount of declined finished goods inventory under absorption and variable costing, calculate the difference in the reported operating income for year 2 under absorption and variable costing, and compare both differences.

6.

To determine

Explain whether the given relationship between the absorption and variable costing will always true at any balance sheet date.