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 manufacturing overhead 410,650
Variable manufacturing overhead 191,000
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 $
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Closing inventory in units
units
Finished goods inventory, January 1 2,600
Production 19,100
Sales ...
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