Exercise 6-9 Variable and Absorption Costing Unit Product Costs and Income State

Question

Exercise 6-9 Variable 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 Variable costs per unit: Manufacturing $ 25 $ 17 S3 S 2 Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative Fixed costs per year: Fixed manufacturing overhead Fixed selling and administrative expenses $400,000 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 $56 per unit. Required 1. Assume the company uses variable costing a. Compute the unit product cost for year 1 and year 2 Year 1 Year 2 Unit product cost

Explanation / Answer

Solution:

1.

b.

Year 1 Year 2 Direct Cost Direct Material 25 25 Direct Labor 17 17 Variable manufacturing overhead 3 3 Unit product cost 45 45

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