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ACT310: Managerial Accounting Assignment 3 Summer 2020 2 | P a g e
Question 1: (75 points): Norvath, Inc. began operations at the start of the current year, having a
production target of 60,000 units. Actual production totaled 60,000 units, and the company sold
57,000 units of its manufacturing output at $50 per unit. The following costs were incurred:
Manufacturing: Direct material used 120,000
Direct labor 240,000
Variable manufacturing overhead 180,000
Fixed manufacturing overhead 300,000
Selling and administrative:
Variable Selling and administrative 90,000
Fixed Selling and administrative 315,000
Finished-goods inventory, January 1 None
Required: Summarize your final answer in the attached table.
A. Calculate total inventoriable cost (product cost) using variable costing.
B. Calculate total inventoriable cost (product cost) using absorption costing.
C. Which costing methods, absorption or variable costing, would show a higher operating
income for the year? By what amount.
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