Reference no: EM133117334

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.