Accounting: What the Numbers Mean 9th Edition by Wayne W McManus, Daniel F Viele, David H Marshall

Exercise 85

Variable versus absorption costing Brent, Inc., manufactures wool sweaters. Costs incurred in making 55,000 sweaters in August included $330,000 of fixed manufacturing overhead. The total absorption cost per sweater was $38.60.

Required:

a.Calculate the variable cost per sweater.

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b. The ending inventory of sweaters was 7,200 units lower at the end of the month than at the beginning of the month. By how much and in what direction (higher or lower) would cost of goods sold for the month of August be different under variable costing than under absorption costing?

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c. Express the sweater cost in a cost formula.

Step 1 of 4

Variable versus absorption costing

By extracting the information: