outback corporation manufactures rechargeable flashlights 455563
Aug 29, 2021 | Uncategorized
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Outback Corporation manufactures rechargeable flashlights in Brisbane, Australia. The firm uses an absorption costing system for internal reporting purposes; however, the company is considering using variable costing. Data regarding Outback’s planned and actual operations for 20×1 follow:
|
|
Budgeted Costs |
|
|
|
|
|
Per Unit |
Total |
Actual Costs |
| Direct material |
$ |
12.20 |
|
$ |
1,683,600 |
|
$ |
1,537,200 |
|
| Direct labor |
|
9.40 |
|
|
1,297,200 |
|
|
1,184,400 |
|
| Variable manufacturing overhead |
|
4.70 |
|
|
648,600 |
|
|
592,200 |
|
| Fixed manufacturing overhead |
|
4.90 |
|
|
676,200 |
|
|
688,200 |
|
| Variable selling expenses |
|
7.70 |
|
|
1,062,600 |
|
|
931,700 |
|
| Fixed selling expenses |
|
7.30 |
|
|
1,007,400 |
|
|
1,007,400 |
|
| Variable administrative expenses |
|
2.40 |
|
|
331,200 |
|
|
290,400 |
|
| Fixed administrative expenses |
|
3.10 |
|
|
427,800 |
|
|
433,800 |
|
|
|
|
|
|
|
|
|
|
|
| Total |
$ |
51.70 |
|
$ |
7,134,600 |
|
$ |
6,665,300 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Planned Activity |
Actual Activity |
| Beginning finished goods inventory in units |
41,000 |
|
41,000 |
|
| Sales in units |
138,000 |
|
121,000 |
|
| Production in units |
138,000 |
|
126,000 |
|
|
|
The budgeted per unit cost figures were based on Outback producing and selling 138,000 units in 20×1. Outback uses a predetermined overhead rate for applying manufacturing overhead to its product. A total manufacturing overhead rate of $9.60 per unit was employed for absorption costing purposes in 20×1. Any overapplied or underapplied manufacturing overhead is closed to the Cost of Goods Sold account at the end of the year. The 20×1 beginning finished goods inventory for absorption costing purposes was valued at the 20×0 budgeted unit manufacturing cost, which was the same as the 20×1 budgeted unit manufacturing cost. There are no work in process inventories at either the beginning or the end of the year. The planned and actual unit selling price for 20×1 was $70.40 per unit.
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| Was Outback’s 20×1 income higher under absorption costing or variable costing? |
|
| |
It was higher under variable costing. |
| |
It was higher under absorption costing. |
|
| 1. |
Compute the value of Outback Corporation’s 20×1 ending finished goods inventory under absorption costing. (Do not round your intermediate calculations. Omit the “$” sign in your response.)
|
| Finished goods inventory |
$ |
| 2. |
Compute the value of Outback Corporation’s 20×1 ending finished goods inventory under variable costing. (Do not round your intermediate calculations. Omit the “$” sign in your response.)
|
| Finished goods inventory |
$ |
| 3. |
Compute the difference between Outback Corporation’s 20×1 reported income calculated under absorption costing and calculated under variable costing. (Do not round your intermediate calculations. Omit the “$” sign in your response.)
|
| Difference in reported income |
$ |
