Ruggles Company Has Provided the Following Data for the Year

question 69

Essay

Ruggles Company has provided the following data for the year ended 30 September 2018.
$\begin{array}{lr}\text { Sales: } & 24000 \text { units at } \$ 50 \text { each } \\\text { Expected and actual production: } & 30000 \text { units } \\\text { Manufacturing costs incurred: } &\\\text { Variable: } & \$ 525000 \\\text { Fixed: } & \$ 372000\\\text { Nonmanufacturing costs incurred: }\\\text { Variable: } & \$ 144800 \\\text { Fixed: } & \$ 77400 \\\text { Beginning inventories: } & \text { none }\end{array}$
Required:
a.Determine operating profit using the variable-costing approach.
b.Determine operating profit using the absorption-costing approach.
c.Explain why operating profit is not the same under the two approaches.
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Definitions:

Freight-in

The cost of shipping goods into a business, which is often included in the cost of inventory.

Cost of Goods

Cost of Goods refers to the direct costs attributable to the production of the goods sold by a company, including materials and labor.

Ending Inventory

At the close of an accounting period, the valuation of merchandise ready for sale is identified by summing up the initial inventory with buys and deducting the expense of goods sold.

Ending Inventory

The total value of all inventory a company has in stock at the end of an accounting period, which is used to calculate the cost of goods sold.