Reference no: EM133110794
Question - Great Outdoze Company manufactures sleeping bags, which sell for $66.50 each. The variable costs of production are as follows:
Direct material $18.70
Direct labor 10.00
Variable manufacturing overhead 6.70
Budgeted fixed overhead in 20x1 was $165,000 and budgeted production was 22,000 sleeping bags. The year's actual production was 22,000 units, of which 18,300 were sold. Variable selling and administrative costs were $1.80 per unit sold; fixed selling and administrative costs were $28,000.
Required -
1. Calculate the product cost per sleeping bag under (a) absorption costing and (b) variable costing.
2-a. Prepare an operating income statement for the year using absorption costing.
2-b. Prepare an operating income statement for the year using variable costing.
3. Reconcile reported operating income under the two methods using the shortcut method.
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