Variable versus absorption costing
Response to the following problem:
Brent, Inc., manufactures wool sweaters. Costs incurred in making 55,000 sweaters in August included $330,000 of fixed manufacturing overhead. The total absorption cost per sweater was $38.60.
Required:
a. Calculate the variable cost per sweater.
b. The ending inventory of sweaters was 7,200 units lower at the end of the month than at the beginning of the month. By how much and in what direction (higher or lower) would cost of goods sold for the month of August be different under variable costing than under absorption costing?
c. Express the sweater cost in a cost formula.