Q:

Variable versus absorption costing: Precision Numbers, Inc., manufactures pocket calculators. Costs incurred in making 25,000 calculators in April included $85,000 of fixed manufacturing overhead. The total absorption cost per calculator was $12.50.

Required:

a. Evaluate the variable cost per calculator.

b. The ending inventory of pocket calculators was 1,850 units higher at the end of the month than at the starting of the month. By how much and in what direction (lower or higher) would operating income for the month of April be different under variable costing than under absorption costing?

c. Express the pocket calculator cost in a cost formula.