Langdon Company produced 10,000 units during the past year, but only 9,000 of the units were sold. The following additional information is also available.
Direct materials used …………………………………$90,000
Direct labor incurred ………………………………….$30,000
Variable manufacturing overhead …………………….$24,000
Fixed manufacturing overhead ……………………….$50,000
Fixed selling and administrative expenses ……………$70,000
Variable selling and administrative expenses …………$10,000
There was no work in process inventory at the beginning of the year, nor did Langdon have any beginning finished goods inventory.
Instructions
(a) What would be Langdon Company’s finished goods inventory cost on December 31 under variable costing?
(b) Which costing method, absorption or variable costing, would show a higher net income for the year? By what amount?