Lehighton chalk company – variable and absorption costing

 
   

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Lehighton Chalk Company manufactures sidewalk chalk, which it sells online by the box at $50 per unit. Lehighton uses an actualcosting system, which means that the actual costs of direct material, direct labor, and manufacturing overhead are entered into workinprocess inventory. The actual application rate for manufacturing overhead is computed each year; actual manufacturing overhead is divided by actual production (in units) to compute the application rate. Information for Lehightons first two years of operation is as follows:Year1Sales (in units)Production (in units)Production costs:Variable manufacturing costsFixed manufacturing overhead Year 2