Question
Rustys Granite Counter Tops is a fabricator of fine bathroom granite counter tops and sink assemblies....
Rustys Granite Counter Tops is a fabricator of fine bathroom granite counter tops and sink assemblies. Rusty's uses one species of granite and one model of sink to stabilize production processes and reduce costs. Rusty's offers its counter-top and sink assemblies in 48, 60 and 72 inch sizes. Information related to Rusty's most popular 60 inch counter top is provided below. Rusty had no beginning finished goods inventory of this item.
Production in units: 3,000 counter top units
Sales in Units: 2,8000 counter top units
Unit selling price: $300 per counter-top unit
Direct Labor Hours Used: 3,600 Hours
Manufacturing Costs:
Direct Materials: $360,000
Direct Labor: $72,000
Variable Manufacturing Overhead: $18,000
Fixed Manufacturing Overhead: $180,000
Non-Manufacturing Costs:
Variable Selling Expenses: $45,000
Fixed Selling Expenses: $120,000
1.) Determine the actual variable product cost of one counter-top unit
2.)Determine the total cost of ending finished goods inventory using absorption costing
3.) Determine the difference in income under variable versus absorption costing for Rusty's Granite Counter Tops. Indicate which method will report higher income if it is different.
Homework Answers
Answer #1
The answer has been presented in the supporting sheets. All the parts has been solved with detailed explanation and formulas. For first part variable product cost per unit has been calculated. For second part total cost of closing inventory has been calculated. For third part detailed calculation has been presented in the supporting sheets and absorption costing report higher net income. For detailed answers refer to the supporting sheets.
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