Description of this paper

Prepare an adjusting entry that will put cost of goods sold and finished goods inventory on an absorption costing basis

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solution


Question

Monrad Corporation uses variable costing for internal reporting purposes. Its preadjusted trial balance for the year ended December 31 shows;An analysis shows that cost of goods sold represents 30,000 direct labor-hours, and finished goods inventory 3,000 direct labor-hours. Monrad feels that the best way of allocating a fair share of nonvariable production costs to products is on the basis of direct labor-hours.;Required;Prepare an adjusting entry that will put cost of goods sold and finished goods inventory on an absorption costing basis.;What will be the difference between pretax income on a variable costing basis and on an absorption costing basis (assume zero beginning-of-year finished goods inventory)?;What will be the December 31 amount of finished goods inventory on an absorption costing basis?

 

Paper#23913 | Written in 18-Jul-2015

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