Question

Langdon Company produced 8,600 units during the past year, but only 8,500 of the units were sold. The following additional information is also available.

Direct materials used		$72,200
Direct labor incurred		$30,500
Variable manufacturing overhead		$22,000
Fixed manufacturing overhead		$34,400
Fixed selling and administrative expenses		$71,500
Variable selling and administrative expenses		$8,000

There was no work in process inventory at the beginning and end of the year, nor did Langdon have any beginning finished goods inventory.

(a)

What would be Langdon Company’s finished goods inventory cost on December 31 under variable costing? (Round intermediate calculations to 2 decimal places e.g. 10.25 and final answer to 0 decimal places, e.g. 2,510.)

Finished goods inventory cost

$

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(b)

Which costing method, absorption or variable costing, would show a higher net income for the year? By what amount? (Round intermediate calculations to 2 decimal places e.g. 10.25 and final answer to 0 decimal places, e.g. 2,510.)

                                                                      Absorption Costing or Variable costing method would show a higher net income by $ ___________

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Solution:

A.

What would be Langdon Company’s finished goods inventory cost on December 31 under variable costing? $157650

B.

Absorption costing will have show a higher net income to the tune of (157650-157250) $400

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