Laser-Save recycles used toner cartridges for laser printers. 1) In October, 1,000 cartridges were recycled and sold: Direct materials Direct labor Variable overhead Fixed overhead $ 5/unit $15/unit $ 3/unit Variable selling & admin. Fixed selling & admin. Selling price a) Absorption costing i) Manufacturing cost/unit = ii) Operating income = b) Variable costing $20,000 $1.25/unit $12,000 1) Manufacturing cost/unit- ii) Operating income- iii) Ending inventory b) Variable costing $23/unit variable cost i) Manufacturing cost/unit = ii) Operating income = 2) In November, 1,250 cartridges were recycled and 1,000 were sold: a) Absorption costing $60/unit i) Manufacturing cost/unit ii) Operating income. iii) Ending inventory = c) Why is operating income higher under absorption costing than under variable costing? 2

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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Laser-Save recycles used toner cartridges for laser printers.
1) In October, 1,000 cartridges were recycled and sold:
Direct materials
Direct labor
$ 5/unit
$15/unit
$ 3/unit
Variable overhead
Fixed overhead
Variable selling & admin.
Fixed selling & admin.
Selling price
a) Absorption costing
i) Manufacturing cost/unit =
ii) Operating income =
b) Variable costing
$20,000
$1.25/unit
$12,000
1) Manufacturing cost/unit-
ii) Operating income-
iii) Ending inventory -
b) Variable costing
$23/unit variable cost
i) Manufacturing cost/unit=
ii) Operating income =
2) In November, 1,250 cartridges were recycled and 1,000 were sold:
a) Absorption costing
$60/unit
i) Manufacturing cost/unit
ii) Operating income.
iii) Ending inventory =
c) Why is operating income higher under absorption costing than under
variable costing?
2
Transcribed Image Text:Laser-Save recycles used toner cartridges for laser printers. 1) In October, 1,000 cartridges were recycled and sold: Direct materials Direct labor $ 5/unit $15/unit $ 3/unit Variable overhead Fixed overhead Variable selling & admin. Fixed selling & admin. Selling price a) Absorption costing i) Manufacturing cost/unit = ii) Operating income = b) Variable costing $20,000 $1.25/unit $12,000 1) Manufacturing cost/unit- ii) Operating income- iii) Ending inventory - b) Variable costing $23/unit variable cost i) Manufacturing cost/unit= ii) Operating income = 2) In November, 1,250 cartridges were recycled and 1,000 were sold: a) Absorption costing $60/unit i) Manufacturing cost/unit ii) Operating income. iii) Ending inventory = c) Why is operating income higher under absorption costing than under variable costing? 2
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