Purchase Solution

# Easton Pump Company: Finished-Goods Inventory Cost

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Easton Pump Company's planned production for the year just ended was 19,100 units. This production level was achieved, and 20,400 units were sold. Other data follow:

Direct material used \$ 590,190
Direct labor incurred 271,220
Fixed selling and administrative expenses 317,060
Variable selling and administrative expenses 92,635
Finished-goods inventory, January 1 2,600 units

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There were no work-in-process inventories at the beginning or end of the year.

Required:

1. What would be Easton Pump Company's finished-goods inventory cost on December 31 under the variable-costing method? (Do not round your intermediate calculations.

Finished-goods inventory cost \$

2-a. Which costing method, absorption or variable costing, would show a higher operating income for the year?

Variable costing
Absorption costing

2-b. By what amount? (Do not round your intermediate calculations.

Difference in reported income \$

##### Solution Summary

This solution provides a complete computation of the given accounting problem formatted in Excel.

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Closing inventory in units
units
Finished goods inventory, January 1 2,600
Production 19,100
Sales ...

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