Andréa's Bakery Produces Frozen Pizzas,which It Sells for $10 Each

question 243

Essay

Andréa's Bakery produces frozen pizzas,which it sells for $10 each.The company uses the FIFO inventory costing method and it computes a new monthly fixed manufacturing overhead rate based on the actual number of meals produced that month.All costs and production levels are exactly as planned.The following data are from Andréa's Bakery first two months in business:

Required:
1.Compute the product cost per meal produced under absorption costing and under variable costing.Do this first for July and then for August.
2.Prepare separate monthly income statements for July and for August,using (a)absorption costing and (b)variable costing.
3.Is operating income higher under absorption costing or variable costing in July? In August? Explain the pattern of differences in operating income based on absorption costing versus variable costing.

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Definitions:

Agreeableness

A personality trait characterized by warmth, kindness, and a cooperative or sympathetic attitude towards others.

Big Five Personality Dimensions

A model describing human personality through five broad dimensions: openness, conscientiousness, extraversion, agreeableness, and neuroticism.

Locus of Control

A psychological concept that refers to individuals' belief about the extent to which their actions influence the outcome of events.

Neuroticism

A personality trait characterized by the tendency to experience negative emotions such as anxiety, anger, or depression.