Question - Baker company produced 30000 units and sold 28000 units in 2011 ($200/unit). Beginning inventory was zero. During the period, the following costs were incurred.

Indirect labor $60000

Indirect materials $30000

Other (variable overhead) $90000

Fixed manufacturing overhead $180000

Fixed administrative expenses $150000

Fixed selling expenses $120000

Variable selling expenses, per unit $40

Direct labor, per unit $80

Direct materials, per unit $20

Required:

Compute the dollar amount of ending inventory and profit using absorption costing.

Compute the dollar amount of ending inventory and profit using variable costing.

Reconcile and explain the difference between absorption costing profit and variable costing profit.