Answered: Borques Company produces and sells…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter2: Basic Cost Management Concepts

Section: Chapter Questions

Problem 21E: Ellerson Company provided the following information for the last calendar year: During the year,...

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Borques Company produces and sells wooden pallets that are used for moving and stacking materials. The operating costs for the past year were as follows:

Variable costs per unit:
Direct materials	$2.85
Direct labor	$1.92
Variable overhead	$1.60
Variable selling	$0.90
Fixed costs per year:
Fixed overhead	$180,000
Selling and administrative	$96,000

During the year, Borques produced 200,000 wooden pallets and sold 204,300 at $9 each. Borques had 8,200 pallets in beginning finished goods inventory; costs have not changed from last year to this year. An actual costing system is used for product costing.

REQUIRED:

1. Calculate absorption-costing operating income.

2. What would the per-unit inventory cost be under variable costing? Does this differ from the unit cost computed in Requirement 1? Why?

3. Calculate variable-costing operating income.

4. Suppose that Borques Company had sold 196,700 pallets during the year. What would absorption-costing operating income have been? Variable-costing operating income

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