Holly Inc., has the following data regarding their business:
Planned & actual production: 38,000 units
Sales: 36,500 units at $12 per unit
Production costs - variable: $3.25 per unit
Production costs - fixed: $243,000
Selling and admin - variable: $0.95 per unit
Selling and admin - fixed: $31,000
For all of the below questions, assume that this is Holly Inc.'s first period in business.
1. What is the gross margin calculated on an absorption-costing income statement?
2. What is the contribution margin calculated on a variable-costing income statement?
3. What is the ending inventory figure for the period assuming they adopt absorption-costing?
4. What is the ending inventory figure for the period assuming they adopt variable-costing?
5. Is there a difference in income between absorption-costing and variable costing? If so, reconcile the difference.