Walsh Company manufactures and sells one product. The following information pert
ID: 2405747 • Letter: W
Question
Walsh Company manufactures and sells one product. The following information pertains to each of the company’s first two years of operations:
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 $53 per unit.
Prepare an income statement for year 1 and year 2.
Compute the unit product cost for year 1 and year 2. (Round your answer to 2 decimal places.)
Prepare an income statement for year 1 and year 2. (Round your intermediate calculations to 2 decimal places)
Reconcile the difference between variable costing and absorption costing net operating income in year 1 and year 2.
Walsh Company manufactures and sells one product. The following information pertains to each of the company’s first two years of operations:
Explanation / Answer
1. COMPUTATION OF COST PER UNIT USES VARIABLE COSTING :
(A)COMPUTATION OF UNIT COST
COST PER UNIT = DIRECT MATERIAL + DIRECT LABOUR + VARIABLE MANUFACTURING
OVERHEADS
(B) INCOME STATEMENT FOR YEAR 1 AND YEAR 2 :
2) COMPUTATION OF COST PER UNIT USES ABSORBING COSTING :
(A) COMPUTATION OF UNIT COST
working note 1:
fixed manufacturing overheads = fixed manufacturing overheads / number of units produced
year 1 = 320000/50000 = 6.4
year 2 = 320000/40000 = 8
(B) INCOME STATEMENT FOR YEAR 1 AND YEAR 2 :
(c) computation of difference between variable costing and absorption costing net operating income in year 1 and year 2
PARTICULARS YEAR 1 YEAR 2 direct material 30 30 dirext labour 17 17 variable manufacturing overheads 2 2 COST PER UNIT 49 49Related Questions
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