Case Scenario:
M. J. Lighting uses direct costing for all internal reporting. For the current year, finished goods inventory, under variable costing was as follows (M.J. does not have any work inprocess):
Beginning of year End of year
Finished Goods $7,000 $4,500
The inventory, for external reporting purposes, would include $1,100 in fixed manufacturing overhead for the beginning and $950 for the ending inventory. Total variable manufacturing costs during the year were $32,500 and fixed manufacturing costs were $10,500.
Q1. What is the cost of goods sold for the current year under direct (variable) costing?
a. $33,900
b. $35,000
c. $36,500
d. $40,300
e. $40,500
Q2. Assuming that M. J. used absorption costing for both internal and external reporting, what would cost of goods sold be for the year?
a. $35,150
b. $40,650
c. $45,350
d. $45,500
e. $45,650