Fixed cost expensed as period expense 9800 28710 Total 40040 42480 Difference

Fixed cost expensed as period expense 9800 28710

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Fixed cost (expensed as period expense) 9,800* 28,710† Total $ 40,040 $ 42,480 Difference (cost greater on variable-costing income statement) $2,440 Reported operating income $ 19,360 $ 16,920 Difference in reported operating income (income greater on absorption- costing income statement) $2,440 *Fixed selling and administrative cost only
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†Both fixed selling and administrative cost and fixed manufacturing overhead Year 2 Absorption Costing Income Statement Variable Costing Income Statement Cost of goods sold $ 35,120 $ 13,770 Fixed cost (expensed as period expense) 9,800 28,710 Total $ 44,920 $ 42,480 Difference (cost greater on absorption-costing income statement) $2,440 Reported operating income $ 14,480 $ 16,920 Difference in reported operating income (income greater on variable-costing income statement) $2,440 2. Variable-costing operating income statements: Year 1 Year 2 Sales revenue $70,200 a $70,200 d Less: Cost of goods sold: Beginning finished-goods inventory $ 0 $ 2,040 e Cost of goods manufactured 15,810 b 11,730 f Cost of goods available for sale $15,810 $13,770 Ending finished-goods inventory 2,040 c 0 Cost of goods sold $13,770 $13,770 Variable selling and administrative costs $10,800 $10,800 Total variable costs: $24,570 $24,570 Contribution margin $45,630 $45,630 Less: Fixed costs:
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Manufacturing $18,910 $18,910 Selling and administrative 9,800 9,800 Total fixed costs $28,710 $28,710 Operating income $16,920 $16,920 a 2,700 units × $26 b The variable manufacturing cost only, $15,810 c 400 units × ($15,810/3,100 units) d 2,700 units × $26 per unit e Same as year 1 ending inventory f The variable manufacturing cost only, $11,730 Total operating income across both years: a. Absorption costing: $19,360 + $14,480 = $33,840 b. Variable costing: $16,920 + $16,920 = $33,840 3. Total sales revenue across both years: a. Absorption costing: $70,200 + $70,200 = $140,400 b. Variable costing: $70,200 + $70,200 = $140,400 4. Total of all costs expensed across both years: a. Absorption costing: $50,840 + $55,720 = $106,560 b. Variable costing: $53,280 + $53,280 = $106,560 5. Total sales revenue minus total costs expensed across both years. a. Absorption costing: $140,400 – $106,560 = $33,840 b. Variable costing: $140,400 – $106,560 = $33,840 6. The total sales revenue across both of Lehighton’s first two years of operation is the same under absorption and variable costing, $140,400, as shown in requirement (3). Sales revenue has nothing to do with the costing method used. Lehighton sold 5,400 units in years 1 and 2 combined, at a sales price of $26. This results in total sales revenue for the two years of $140,400.
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  • Spring '14
  • Zeeshan
  • Lehighton, actual costs of direct material

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