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:
1. What would be Pandora Pillow Company’s finished-goods inventory cost on December 31 under a the variable-costing method?
2. Which costing method, absorption or variable costing, would show a higher operating income for the year? By what amount?
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?
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