Pacific Sports Operating Income, Business Finance Homework help

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Pacific Sports, Inc. makes surf boards. Following are inventory and cost figures relative to the year ended June 30 2013:

  Beginning inventory  1,000 units

  Produced  10,000 units

  Sold  8,000 units

  Sales price per unit      $500

  Variable production costs per unit    $200

  Fixed production costs unit  $100

  SG&A Expenses  $1,000,000

Required:

  1. Compute the operating income using the absorption method.
  2. Compute the operating income using the variable costing method.
  3. Reconcile the difference.
  4. Why might a company choose to use variable costing for management purposes?

 
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