Question
In: Accounting
The following information pertains to each of the company’s first two years of operations: Variable costs...
The following information pertains to each of the company’s first two years of operations:
| Variable costs per unit: | ||
| Manufacturing: | ||
| Direct materials | $ | 25 |
| Direct labor | $ | 12 |
| Variable manufacturing overhead | $ | 4 |
| Variable selling and administrative | $ | 3 |
| Fixed costs per year: | ||
| Fixed manufacturing overhead | $ | 320,000 |
| Fixed selling and administrative expenses | $ | 60,000 |
- During its first year of operations, Walsh produced 50,000 units and sold 40,000 units.
- During its second year of operations, it produced 40,000 units and sold 50,000 units.
- The selling price of the company’s product is $59 per unit.
Required:
1. Assume the company uses variable costing:
a. Compute the unit product cost for Year 1 and Year 2.
b. Prepare an income statement for Year 1 and Year 2.
2. Assume the company uses absorption costing:
a. Compute the unit product cost for Year 1 and Year 2.
b. Prepare an income statement for Year 1 and Year 2.
3. Reconcile the difference between variable costing and absorption costing net operating income in Year 1.
Solutions
ekkarill92 answered 2 years agoRelated Solutions
Variable Costing Income Statement; During Heaton Company’s first two years of operations, the company reported absorption...
Variable Costing Income Statement;
During Heaton Company’s first two years of operations, the
company reported absorption costing net operating income as
follows:
Year 1
Year 2
Sales (@ $64 per unit)
$
1,088,000
$
1,728,000
Cost of goods sold (@ $37 per unit)
629,000
999,000
Gross margin
459,000
729,000
Selling and administrative expenses*
301,000
331,000
Net operating income
$
\158,000\
$
398,000
* $3 per unit variable; $250,000 fixed...
The following information pertains to a company’s Finishing Department operations in May. Units % Completion Work-in-process,...
The following information pertains to a company’s Finishing
Department operations in May.
Units
% Completion
Work-in-process, May 1
2,000
40%
Units started during May
10,000
Units completed and transferred to FG
8,000
Work-in-process, May 31
?
25%
Materials are added at the end of the process, and conversion
costs are incurred evenly throughout the process. The equivalent
units of materials added during May were
A.8,000
B.8,200
C.9,100
D.10,000
Computation of Variable Cost Variances The following information pertains to the standard costs and actual activity...
Computation of Variable Cost Variances
The following information pertains to the standard costs and actual
activity for Tyler Company for September:
Standard cost per unit
Direct materials
4 units of material A × $2.00 per
unit
1 unit of material B × $3.00 per
unit
Direct labor
3 hours × $8.00 per hour
Activity for September
Materials purchased
Material A
2,600 units × $2.05 per unit
Material B
700 units × $3.10 per unit
Materials used
Material A
2,250 units...
Computation of Variable Cost Variances The following information pertains to the standard costs and actual activity...
Computation of Variable Cost Variances
The following information pertains to the standard costs and actual
activity for Repine Company for September:
Standard cost per unit
Direct materials
3 units of material A x $8.00 per unit
2 units of material B x $4.00 per unit
Direct labor
2 hours x $15.00 per hour
Activity for September
Materials purchased
Material A
7,000 units x $7.80 per unit
Material B
4,800 units x $4.50 per unit
Materials used
Material A
6,430 units...
Computation of Variable Cost Variances The following information pertains to the standard costs and actual activity...
Computation of Variable Cost Variances The following information
pertains to the standard costs and actual activity for Repine
Company for September: Standard cost per unit Direct materials 4
units of material A x $ 6.00 per unit
1 unit of material B x $ 8.00 per unit
Direct labor 3 hours x $ 18.00 per hour
Activity for September
Materials purchased
Material A 6,750 units x $ 6.20 per unit
Material B 1,650 units x $ 8.50 per unit
Materials...
Letcher Corporation manufactures and sells one product. The following information pertains to the company’s first year...
Letcher Corporation manufactures and sells one product. The
following information pertains to the company’s first year of
operations:
Variable costs per unit:
Direct materials
$
94
Fixed costs per year:
Direct labor
$
709,200
Fixed manufacturing overhead
$
4,373,400
Fixed selling and administrative expenses
$
2,244,600
The company does not have any variable manufacturing overhead
costs or variable selling and administrative expenses. During its
first year of operations, the company produced 59,100 units and
sold 57,000 units. The company’s only...
Bracey Company manufactures and sells one product. The following information pertains to the company’s first year...
Bracey Company manufactures and sells one product. The following
information pertains to the company’s first year of operations:
Variable cost per unit:
Direct materials
$
31
Fixed costs per year:
Direct labor
$
429,000
Fixed manufacturing overhead
$
421,200
Fixed selling and administrative expenses
$
72,000
The company does not incur any variable manufacturing overhead
costs or variable selling and administrative expenses. During its
first year of operations, Bracey produced 26,000 units and sold
23,900 units. The selling price of...
Bracey Company manufactures and sells one product. The following information pertains to the company’s first year...
Bracey Company
manufactures and sells one product. The following information
pertains to the company’s first year of operations:
Variable cost per unit:
Direct materials
$
35
Fixed costs per year:
Direct labor
$
518,000
Fixed manufacturing overhead
$
464,800
Fixed selling and administrative expenses
$
80,000
The company does not
incur any variable manufacturing overhead costs or variable selling
and administrative expenses. During its first year of operations,
Bracey produced 28,000 units and sold 25,500 units. The selling
price of...
Bracey Company manufactures and sells one product. The following information pertains to the company’s first year...
Bracey Company manufactures and sells one product. The following
information pertains to the company’s first year of operations:
Variable cost per unit:
Direct materials
$
21
Fixed costs per year:
Direct labor
$
241,500
Fixed manufacturing overhead
$
319,200
Fixed selling and administrative expenses
$
52,000
The company does not incur any variable manufacturing overhead
costs or variable selling and administrative expenses. During its
first year of operations, Bracey produced 21,000 units and sold
19,900 units. The selling price of...
Bracey Company manufactures and sells one product. The following information pertains to the company’s first year...
Bracey Company manufactures and sells one product. The following
information pertains to the company’s first year of operations:
Variable cost per unit:
Direct materials
$
20
Fixed costs per year:
Direct labor
$
225,500
Fixed manufacturing overhead
$
309,550
Fixed selling and administrative expenses
$
50,000
The company does not incur any variable manufacturing overhead
costs or variable selling and administrative expenses. During its
first year of operations, Bracey produced 20,500 units and sold
19,500 units. The selling price of...
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