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Skinny Dippers 300000

Price: $2.50

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

Sales Price 15
Direct material 5
Direct labor 2
Variable Overhead 3

Budgeted fixed overhead in 20x1, the company's first year of operations, was 300,000
Planned and actual production was 150,000 five-gallon containers, of which
125,000 were sold. Skinny Dippers, Inc. incurred the following selling and administrative expenses.

Fixed   $50,000
Variable $1

1. Compute the product cost per container of frozen yogurt under
( a ) variable costing and (b ) absorption costing.
2. Prepare income statements for 20x1 using ( a ) absorption costing and ( b ) variable costing.
3. Reconcile the income reported under the two methods by listing the two key places where
the income statements differ.
4. Reconcile the income reported under the two methods using the shortcut method.

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