Borques Company produces and sells wooden pallets that are used for moving and stacking materials. The operating costs for the past year were as follows: Variable costs per unit: Direct materials $2.85 Direct labor $1.92 Variable overhead $1.60 Variable selling $0.90 Fixed costs per year: Fixed overhead $180,000 Selling and administrative $96,000 During the year, Borques produced 200,000 wooden pallets and sold 204,300 at $9 each. Borques had 8,200 pallets in beginning finished goods inventory; costs have not changed from last year to this year. An actual costing system is used for product costing. 1. Calculate absorption-costing operating income. 2.What would the per-unit inventory cost be under variable costing? Does this differ from the unit cost computed in Requirement 1? Why? 3. Calculate variable-costing operating income. 4.Suppose that Borques Company had sold 196,700 pallets during the year. What would absorption-costing operating income have been? Variable-costing operating income?
Borques Company produces and sells wooden pallets that are used for moving and stacking materials. The operating costs for the past year were as follows:
Variable costs per unit: |
|
Direct materials |
$2.85 |
Direct labor |
$1.92 |
Variable overhead |
$1.60 |
Variable selling |
$0.90 |
Fixed costs per year: |
|
Fixed overhead |
$180,000 |
Selling and administrative |
$96,000 |
During the year, Borques produced 200,000 wooden pallets and sold 204,300 at $9 each. Borques had 8,200 pallets in beginning finished goods inventory; costs have not changed from last year to this year. An actual costing system is used for product costing.
1. Calculate absorption-costing operating income.
2.What would the per-unit inventory cost be under variable costing? Does this differ from the unit cost computed in Requirement 1? Why?
3. Calculate variable-costing operating income.
4.Suppose that Borques Company had sold 196,700 pallets during the year. What would absorption-costing operating income have been? Variable-costing operating income?
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