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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: 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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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
Publisher: Cengage Learning
ISBN: 9781337115773
BuyFind

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
Publisher: Cengage Learning
ISBN: 9781337115773

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Chapter
Section
Chapter 3, Problem 66P
Textbook Problem

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:

Chapter 3, Problem 66P, Variable-Costing and Absorption-Costing Income Borques Company produces and sells wooden pallets

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. 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. 2. Calculate absorption-costing operating income.
  3. 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. 4. Calculate variable-costing operating income.
  5. 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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Chapter 3 Solutions

Managerial Accounting: The Cornerstone of Business Decision-Making
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