Pandora Pillow Company’s planned production for the year just ended was 10,000 units. This production level was achieved, but only 9,000 units were sold. Other data follow:
Direct material used
Direct labor incurred
Fixed manufacturing overhead
Variable manufacturing overhead
Fixed selling and administrative expenses
Variable selling and administrative expenses
Finished-goods inventory, January 1
There were no work-in-process inventories at the beginning or end of the year.
1. What would be Pandora Pillow Company’s finished-goods inventory cost on December 31 under a the variable-costing method?
2. Which costing method, absorption or variable costing, would show a higher operating income for the year? By what amount?
3. Suppose Pandora Pillow Company uses throughput costing, and direct material is its only unitlevel cost. What would be Pandora’s finished-goods inventory on December 31?