Reference no: EM133069019
Question - Footy Ltd. sells soccer balls and the operating costs for the past year were as follows:
Variable costs per unit:
Direct materials $10
Direct labour $5
Variable overhead $3
Variable selling $2
Fixed costs per year: Fixed overhead for 100,000 units produced $200,000
Selling and administrative expenses $46,000
During the year, Footy Ltd. produced 100,000 soccer balls and sold 80,000 at $35 each. Footy Ltd. had 10,500 soccer balls in beginning finished goods inventory.
Required -
1. What is the per unit product cost that would be recorded on Footy Ltd.'s balance sheet (statement of financial position) at the end of the year?
2. How many units are in ending inventory and what is the value of ending inventory under absorption costing?
3. Prepare an absorption costing income statement.
4. Calculate the per unit product cost using variable costing.
5. Prepare a variable costing income statement.
6. Why is the per unit cost and operating income different under absorption costing method and variable costing method? Explain.
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