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Skinny Dippers, Inc. produces nonfat frozen yogurt. The product is sold in ten-gallon containers, which...

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Accounting

Skinny Dippers, Inc. produces nonfat frozen yogurt. The product is sold in ten-gallon containers, which have the following price and variable costs.

Sales price $ 44
Direct material 17
Direct labor 9
Variable overhead 11

Budgeted fixed overhead in 20x1, the companys first year of operations, was $240,000. Actual production was 80,000 ten-gallon containers, of which 76,000 were sold. Skinny Dippers, Inc. incurred the following selling and administrative expenses.

Fixed $ 160,000 for the year
Variable $ 1 per container sold

Required:

1. Compute the product cost per container of frozen yogurt under (a) variable costing and (b) absorption costing.

2-a. Prepare operating income statements for 20x1 using absorption costing.

2-b. Prepare operating income statements for 20x1 using variable costing.

3. Reconcile the operating income reported under the two methods by listing the two key places where the income statements differ.

4. Reconcile the operating income reported under the two methods using the shortcut method.

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