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Variable Costing, Absorption Costing

During its first year of operations, Snobegon, Inc. (located in Lake Snobegon, Minnesota), produced 40,000 plastic snow scoops. Snow scoops are oversized shovel-type scoops that are used to push snow away. Unit sales were 38,000 scoops. Fixed overhead was applied at $0.75 per unit produced. Fixed overhead was underapplied by $2,700. This fixed overhead variance was closed to Cost of Goods Sold. There was no variable overhead variance. The results of the year's operations are as follows (on an absorption-costing basis):

Sales (38,000 units @ $20)	$760,000
Less: Cost of goods sold	549,460
Gross margin	$210,540
Less: Selling and administrative expenses (all fixed)	184,500
Operating income	$ 26,040

Required:

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1. Calculate the cost of the firm's ending inventory under absorption costing. Round unit cost to five decimal places. Round your final answer to the nearest dollar. $fill in the blank 1334dc0ccfe6072_1

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What is the cost of the ending inventory under variable costing? Round unit cost to five decimal places. Round your final answer to the nearest dollar. $fill in the blank dd9fe7fe7fba068_1

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2. Prepare a variable-costing income statement. Round the unit cost to five decimal places, when required. Round your final answers to the nearest dollar. Use the rounded values in subsequent computations.

Snobegon, Inc. Variable-Costing Income Statement For the First Year of Operations

Fixed overheadFixed selling and administrative expensesSalesVariable cost of goods sold	$- Select -
Less: Fixed overheadLess: Fixed selling and administrative expensesLess: SalesLess: Variable cost of goods sold	- Select -
Contribution margin	$fill in the blank 437b7f09e00df8e_5
Less:
Fixed overheadSalesVariable cost of goods sold	- Select -
Fixed selling and administrative expensesOperating incomeSalesVariable cost of goods sold	- Select -
Operating income	$fill in the blank 437b7f09e00df8e_10

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What is the difference between the two income figures? $fill in the blank 45259ff8d021037_1

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