Variable Costing
Homework Handout Problem 6-2
Variable Costing
Boise Manufacturing Company makes wooden pallets that are sold to trucking companies. Following are inventory, sales and production figures for June 2013:
|
BEGINNING INVENTORY |
1000 UNITS |
|
PRODUCED DURING JUNE |
15,000 UNITS |
|
SOLD DURING JUNE |
14,000 UNITS |
|
SALES AND COST INFORMATION |
|
|
SALES PRICE PER UNIT |
$5.00 |
|
VARIABLE MANUFACTURING COSTS |
$2.00 |
|
FIXED MANUFACTURING COSTS |
$1.00 |
|
SELLING, GENERAL & ADMIN COSTS/MONTH |
$20,000 |
Required:
1. Compute and income statement using the absorption method.
2. Compute an income statement using the variable method.
3. Reconcile and explain the differences.
4. Which method complies with GAAP and why?
5. Why might management convert the internal reporting to a variable statement at the end of the period?
