Absorption vs. variable costingPete’s Plant Stands manufactures wooden stands used by plant nurseries. In May, the company sold 16,560 stands. The cost per unit for the 18,000 stands produced in May was as follows: Direct material $9.00 Direct labor 6.00 Variable overhead 3.00 Fixed overhead 4.00 Total $22.00 There were no beginning inventories for May and no work in process at the end of May. a. What is the value of ending finished goods inventory using absorption costing? $Answerb. What is the value of ending finished goods inventory using variable costing? $Answerc. Which accounting method, variable or absorption, would have produced the higher net income for May?
Absorption vs. variable costingPete’s Plant Stands manufactures wooden stands used by plant nurseries. In May, the company sold 16,560 stands. The cost per unit for the 18,000 stands produced in May was as follows: Direct material $9.00 Direct labor 6.00 Variable overhead 3.00 Fixed overhead 4.00 Total $22.00 There were no beginning inventories for May and no work in process at the end of May. a. What is the value of ending finished goods inventory using absorption costing? $Answerb. What is the value of ending finished goods inventory using variable costing? $Answerc. Which accounting method, variable or absorption, would have produced the higher net income for May?
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter7: Variable Costing For Management
analysis
Section: Chapter Questions
Problem 3PB: Absorption and variable costing income statements for two months and analysis During the first month...
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Absorption vs. variable costing
Pete’s Plant Stands manufactures wooden stands used by plant nurseries. In May, the company sold 16,560 stands. The cost per unit for the 18,000 stands produced in May was as follows:
| Direct material | $9.00 |
| Direct labor | 6.00 |
| Variable |
3.00 |
| Fixed overhead | 4.00 |
| Total | $22.00 |
There were no beginning inventories for May and no work in process at the end of May.
a. What is the value of ending finished goods inventory using absorption costing? $Answer
b. What is the value of ending finished goods inventory using variable costing? $Answer
c. Which accounting method, variable or absorption, would have produced the higher net income for May?
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