Variable-Costing and Absorption-Costing IncomeBorques Company produces and sells wooden pallets that are used for moving and stackingmaterials. The operating costs for the past year were as follows:Variable costs per unit:Direct materials $ 2.85Direct labor $ 1.92Variable overhead $ 1.60Variable selling $ 0.90Fixed costs per year:Fixed overhead $180,000Selling and administrative $ 96,000During 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 fromlast year to this year. An actual costing system is used for product costing.Required:1. What is the per-unit inventory cost that is acceptable for reporting on Borques’s balancesheet at the end of the year? How many units are in ending inventory? What is the totalcost of ending inventory?2. Calculate absorption-costing operating income.3. CONCEPTUAL CONNECTION What would the per-unit inventory cost be under variable costing? Does this differ from the unit cost computed in Requirement 1? Why?4. Calculate variable-costing operating income.5. Suppose that Borques Company had sold 196,700 pallets during the year. Whatwould absorption-costing operating income have been? Variable-costing operatingincome?
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Variable-Costing and Absorption-Costing Income
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. What is the per-unit inventory cost that is acceptable for reporting on Borques’s balance
sheet at the end of the year? How many units are in ending inventory? What is the total
cost of ending inventory?
2. Calculate absorption-costing operating income.
3. CONCEPTUAL CONNECTION What would the per-unit inventory cost be under variable costing? Does this differ from the unit cost computed in Requirement 1? Why?
4. Calculate variable-costing operating income.
5. 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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