Reference no: EM132561699

Relax, Inc., manufactures high-quality sleeping bags, which sell for Rs.130 each. The variable costs of production are as follows:

Direct material Rs.40

Direct labor Rs.22

Variable manufacturing overhead Rs.16

Budgeted fixed overhead in 2019 was Rs.400,000 and budgeted production was 25,000 sleeping bags. The year's actual production was 25,000 units, of which 22,000 were sold. Variable selling and administrative costs were Rs.2 per unit sold; fixed selling and administrative costs were Rs.60,000.

Required:

Question 1. Calculate the product cost per sleeping bag under (a) absorption costing and (b) variable costing.

Question 2. Prepare operating income statements for the year using (a) absorption costing and (b) variable costing.

Question 3. Reconcile reported operating income under the two methods using the shortcut method.