Reference no: EM132600450

Pandora Pillow Company's planned production for the year just ended was 10,000 units. This production level was achieved, but only 9,000 units were sold. Other data follow:

Direct material used ..................................................................................................................... $40,000

Direct labor incurred .................................................................................................................... 20,000

Fixed manufacturing overhead ...................................................................................................... 25,000

Variable manufacturing overhead .................................................................................................. 12,000 Fixed selling and administrative expenses ...................................................................................... 30,000

Variable selling and administrative expenses .................................................................................. 4,500

Finished-goods inventory, January 1 ............................................................................................. None There were no work-in-process inventories at the beginning or end of the year.

Required:

Question 1. What would be Pandora Pillow Company's finished-goods inventory cost on December 31 under the variable-costing method?

Question 2. Which costing method, absorption or variable costing, would show a higher operating income for the year? By what amount?

Question 3. Suppose Pandora Pillow Company uses throughput costing, and direct material is its only unitlevel cost. What would be Pandora's finished-goods inventory on December 31?