The Snow Lover Company manufactures a single product, the ski board. The budgeted selling price...
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Accounting
The Snow Lover Company manufactures a single product, the ski board. The budgeted selling price is $30 per unit. The annual budgeted fixed manufacturing overhead is $3,600,000. Snow Lover has zero inventory at the beginning of 2020.
Information about Snow Lovers budgeted sales and production volume for year 2020 is:
Sales volume 250,000 units
Production volume 300,000 units
The selling and administrative cost is a mixed cost. During years with heavy snow, when Snow Lover sells 500,000 units of ski boards, the selling and administrative cost is $1,300,000. During years with little snow when Snow Lover sells 100,000 units, the selling and administrative cost is $500,000.
Required
a) Use the high-low method to estimate the cost function for selling and administrative costs. (4 marks)
- Calculate the difference in profit between absorption and variable costing method for year 2020. Which stock-costing method has the higher profit? (6 marks)
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