Reference no: EM132610495
Eudora Corporation manufactures a propeller. Shown below is Eudora's cost structure:
...................................................Variable cost per propeller.........................Total fixed cost for the year
Manufacturing cost...........................P114....................................................................P810,000
Selling and administrative..............P20.....................................................................P243,000
In its first year of operations, Eudora produced 60,000 propellers but only sold 54,000.
Question 1. What is the total cost that would be assigned to Eudora's finished goods inventory at the end of the first year of operations under the variable costing method?
Question 2. At what amount will Eudora report its cost of goods sold for this first year for external reporting purposes?
Question 3. Which costing method (variable or absorption) will generate a higher net operating income in Eudora's first year of operations and by how much?
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