Exercise 6.9 Varlable and Absorption Costing Unit Product Costs and Income State

Question

Exercise 6.9 Varlable and Absorption Costing Unit Product Costs and Income Statements [LO6-1, LO6-2, LO6-3 Walsh Company manufactures and sells one product The following Information pertains to each of the company's first two years of operations: lanufacturing Direct materials 29 1? Direct labor Variabie seliing and adninisEPaELVS ,?ned nanufacturing ov.rh.ad Päned eosts per year $320.00ee During its first year of operations, Walsh produced 50.000 units and sold 40.000 units produced 40,000 units and sold 50.000 units. The selling price of the company's product is $54 per unit. Its second year of operations, it Required: 1. Assume the company uses varlable costing a. Compute the unit product cost for Yoar 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 vartable costing and absorption costing net operating income in Year 1

Explanation / Answer

Solution 1a:

Solution 1b:

solution 2a:

Solution 2b:

Solution 3:

Computation of Unit Product Cost - Variable Costing Particulars Year 1 Year 2 Unit Product Cost: Direct material $29.00 $29.00 Direct Labor $17.00 $17.00 Variable manufacturing overhead $5.00 $5.00 Unit Product Cost $51.00 $51.00

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