Razor Corporation produces and sells a single product at $40 per unit. During 2019, the company produced 200,000 units, 160,000 of which were sold during the year. All ending inventory was in finished goods inventory; there was no inventory on hand at the beginning of the year. The following data relate to the company's production process: Direct materials$550,000 Direct labor 400,000 Variable Manufacturing overhead 100,000 Fixed manufacturing overhead 300,000 Variable marketing and administrative 160,000 Fixed marketing and administrative 110,000 Required:Calculate the following. (a) The unit cost of ending inventory on the balance sheet prepared for stockholders.(b) The unit cost of ending inventory on a variable costing balance sheet.(c) The operating income using

Question

absorption costing.(d) The operating income using variable costing.(e) The ending inventory using absorption costing.(f) The ending inventory using variable costing.(g) A reconciliation of the difference in operating income between absorption costing and variable costing using the shortcut method.

What will be an ideal response?

Answer 1

(a) $6.75 [($550,000 + $400,000 + $100,000 + $300,000 = $1,350,000/200,000 = $6.75)]
(b) $5.25 [($550,000 + $400,000 + $100,000 = $1,050,000/200,000 = $5.25)]
(c) $5,050,000 [(Sales ($6,400,000) ? COGS ($1,080,000) ? Marketing ($270,000))]
(d) $4,990,000 [(Sales ($6,400,000) ? Variable cost of goods sold ($840,000) ? Fixed overhead ($300,000) ? Marketing (270,000))]
(e) $270,000 [(40,000 units × $6.75)]
(f) $210,000 [(40,000 units × $5.25)]
(g)