Mahoko PLC's planned production for the year just ended was 18,400 units. This production level was achieved, and 21,200 units were sold. Other data follow: Direct material used $ 552,000 Direct labor incurred 259,440 Fixed manufacturing overhead 390,080 Variable manufacturing overhead 198,720 Fixed selling and administrative expenses 329,360 Variable selling and administrative expenses 100,280 Finished-goods inventory, January 1 3,500 units The cost per unit remained the same in the current year as in the previous year. There were no work-in-process inventories at the beginning or end of the year. Required: 1. What would be Mahoko PLC’s finished-goods inventory cost on December 31 under the variable-costing method? Note: Do not round intermediate calculations. 2-a. Which costing method, absorption or variable costing, would show a higher operating income for the year? 2-b. By what amount?
Mahoko PLC's planned production for the year just ended was 18,400 units. This production level was achieved, and 21,200 units were sold. Other data follow: Direct material used $ 552,000 Direct labor incurred 259,440 Fixed manufacturing overhead 390,080 Variable manufacturing overhead 198,720 Fixed selling and administrative expenses 329,360 Variable selling and administrative expenses 100,280 Finished-goods inventory, January 1 3,500 units The cost per unit remained the same in the current year as in the previous year. There were no work-in-process inventories at the beginning or end of the year. Required: 1. What would be Mahoko PLC’s finished-goods inventory cost on December 31 under the variable-costing method? Note: Do not round intermediate calculations. 2-a. Which costing method, absorption or variable costing, would show a higher operating income for the year? 2-b. By what amount?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Mahoko PLC's planned production for the year just ended was 18,400 units. This production level was achieved, and 21,200 units were sold. Other data follow:
| Direct material used | $ 552,000 | |
|---|---|---|
| Direct labor incurred | 259,440 | |
| Fixed manufacturing |
390,080 | |
| Variable manufacturing overhead | 198,720 | |
| Fixed selling and administrative expenses | 329,360 | |
| Variable selling and administrative expenses | 100,280 | |
| Finished-goods inventory, January 1 | 3,500 | units |
The cost per unit remained the same in the current year as in the previous year. There were no work-in-process inventories at the beginning or end of the year.
Required:
1. What would be Mahoko PLC’s finished-goods inventory cost on December 31 under the variable-costing method?
Note: Do not round intermediate calculations.
2-a. Which costing method, absorption or variable costing, would show a higher operating income for the year?
2-b. By what amount?
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