Tennessee Tack manufactures horse blankets. In 2010, fixed overhead was applied

Question

Tennessee Tack manufactures horse blankets. In 2010, fixed overhead was applied to products at the rate of $8 per unit. Variable cost per unit remained constant throughout the year. In July 2010, income under variable costing was $188,000. July's beginning and ending inventories were 20,000 and 10,400 units, respectively.

a. Calculate income under absorption costing assuming no variances.
$
b. Assume instead that the company's July beginning and ending inventories were 9,000 and 12,000 units, respectively. Calculate income under absorption costing.
$

Explanation / Answer

a)Income under Varible Costing 188,000 minus increase in CGS(FOHout of inventory$8*(20,000-10,400) (76,800) Income under Absorption costing 111,200 b)Income under Variable Costing 188,000 plus decrease in CGS(FOH into invetory $8*(9000-12000)) 24,000 income - absorbtion costing 212,000

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